Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: JEast on January 08, 2010, 05:35:12 PM

Title: ATCO - Atlas Corp
Post by: JEast on January 08, 2010, 05:35:12 PM
Seaspan accepted the delivery of its 43rd containership. By accepting it at the beginning of the year the ship is now classified as one year younger than a December delivery.

http://finance.yahoo.com/news/Seaspan-Accepts-Delivery-of-iw-3196817656.html?x=0&.v=1

Cheers
JEast

Long SSW
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 10, 2010, 06:16:54 PM
I had a giggle today.

Back on Aug 25th/2009 Cramer was asked about Seaspan in the Lightening Round. He said, and I quote: "You are doomed... Here's one... I would rather watch C-Span, than own Seaspan!"

AUG 25th/2009: Stock price was $6.50

(source: http://seekingalpha.com/article/158275-cramer-s-lightning-round-better-watch-c-span-than-buy-seaspan-8-25-09 )

Yesterday on the mad money fund blogspot Cramer picks his best stocks of 2010. His #1 listed January pick C-Span, I mean Seaspan - with a $12.75 target.

JAN 09/2010: Stock price was $10.30

(source: http://www.madmoneyfund.blogspot.com/ )

The guy needs help!  ???

<IV

Title: Re: ATCO - Atlas Corp
Post by: Crip1 on January 10, 2010, 09:38:40 PM

The guy needs help!  ???

<IV



Not as much as his followers do...

-Crip
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 14, 2010, 07:43:54 AM
http://joc.com/node/415886


Container Imports Increase after 30-Month Decline
Bill Mongelluzzo | Jan 11, 2010 6:14PM GMT
The Journal of Commerce Online - News Story

    * Ports/Terminals
    * | Container Shipping
    * | Maritime
    * | United States

Long downturn reverses in December; industry poised for growth

U.S. container ports finally turned the corner in December, with imports estimated to be higher than in December 2008. This would mark the first year-over-year monthly increase in containerized imports in two and one-half years.

According to the monthly Port Tracker published by the National Retail Federation and Hackett Associates, year-over-year increases in imports are projected to continue for the next six months.

However, while growth rates compared to the same months in early 2009 will appear large, the rate of increase will be modest compared to the second half of 2009, said Ben Hackett.

"Although the first five months of 2010 are forecast to post large increases over the same period of the prior year (20.2 percent for the monitored West Coast ports and 13.1 percent for the monitored East Coast ports), growth rates for the prior five months are expected to be small," Port Tracker stated.

Although the exact December numbers have not yet been calculated, it appears that 2009 ended with a total import volume of 12.7 million 20-foot equivalent units for the 10 U.S. ports covered by Port Tracker. That represents a 17 percent decline from 2008 and the lowest annual total since 2003.

Nevertheless, it appears that the industry is poised for growth in 2010 as the U.S. consumer returns to the stores. "Retailers are still going to be cautious with their inventories, but we wouldn't see these increases in imports if stores weren't expecting sales to improve," said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation.

"The U.S. economy is experiencing positive growth, with imports on the rise as a result of re-stocking and a rising consumer demand," Hackett said.

In related developments, Port Tracker noted that the active vessel capacity of the top 20 container lines dropped 2.4 percent in 2009. Capacity management will remain a key carrier strategy in 2010, and this could force freight rates to increase.

Carriers will continue other cost-cutting measures such as slow-steaming to reduce fuel consumption. This will result in longer transit times and will put pressure on supply-chain management.

Dan Smith, a principal with the Tioga Group, said prospects in 2010 for the intermodal railroads, trucking companies and freight intermediaries also appear to be positive.

"If the ocean carriers can be described as 'cautiously optimistic,' the U.S. railroads could be described as 'cautiously hungry,'" Smith stated in Port Tracker. He noted that both the western and eastern railroads are expanding their mainline capacity and inland hubs in anticipation of growing cargo volumes.

Contact Bill Mongelluzzo at bmongelluzzo@joc.com.
Title: Re: ATCO - Atlas Corp
Post by: Partner24 on January 14, 2010, 08:05:39 AM
I mean, this guy is good at investing showbusiness. If you want to be entertained in investing, I guess he's a good guy to watch. That being said, if I want entertainment, I'll watch Lost or The Simpsons episodes or some french speaking episodes ;-)

Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on January 23, 2010, 10:20:55 PM
Have you looked at some of the SSW competitors like DAC?  With the steady CFs in the business, DAC appears cheaper but it does have more debt.

Packer
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 24, 2010, 10:00:49 AM
Yes, similar yet different. Here are a few points of comparison to get you going:

1. DAC is #2 in size behind SSW.
2. DAC has historically had lower payout ratios choosing to retain more cashflow and thereby lowering their need to tap equity markets.
3. DAC has historically run with higher leverage.
4. DAC has shown they will take on higher risk by investing in older ships and playing the spot market a bit.
5. DAC is more dependent on the debt capital markets because of their model.
6. DAC has market value based loan covenants, which allow the company to borrow funds by attaching vessel values to charter-related cash flows although this drives the debt to capital ratios rather high. (North of 80%). They recieved waivers for breaking some loan covenants that I believe expire this fall.
7. DAC's fleet is older than SSW and the industry average.
8. DAC's  average age is 11-12 years, SSW average age is 5-6 years, industry average 8-9 years.
9. Older ships have higher costs (repair, insurance) and therefore leased at lower rates.
10. DAC had quite a few ships expiring as I recall. Greater than SSW when I compared and they are older ships.
11. DAC does not provide as much clarity around their charter rates or partners, as SSW. A little less than 2/3rd of their charter partners & charter rates are "unknowns" as they are bound by non-disclosure agreements. Makes you wonder how many "ZIM's" are counterparties?
12. Danaos advances funds to its Manager in order to pay for regular operating expenses. Unlike Seaspan, Danaos does not disclose
operating costs that are fixed over a given period.
13. Danaos only has 20% float. 80% owned by Coustas.

I think the valuation is lower because of the higher leverage, older ships, and general lack of disclosures compared to SSW.

<IV
Title: Re: ATCO - Atlas Corp
Post by: Daytripper on January 24, 2010, 03:56:47 PM
Thanks for the info IV.  Looks like DAC started to take-off at about the same time as SSW.

http://finance.yahoo.com/q/ta?t=6m&s=DAC&l=on&z=m&q=l&c=SSW (http://finance.yahoo.com/q/ta?t=6m&s=DAC&l=on&z=m&q=l&c=SSW)

Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on February 10, 2010, 03:11:17 PM
http://www.nytimes.com/2010/02/11/business/global/11yuan.html?hpw

Healthy Jump in Chinese Exports Points to Recovery in World Trade

   
By KEITH BRADSHER
Published: February 10, 2010

HONG KONG — China said Wednesday that its exports climbed 21 percent in January from a year earlier, while imports surged 85.5 percent, the latest sign that world trade is starting to recover from the global financial crisis.
Skip to next paragraph
Multimedia
 The Takeaway With Louise Story

China exports increased somewhat less than expected: The consensus of economists had been that exports increased 28 percent. But the healthy jump last month could still fuel further calls from the United States and the European Union for China to break the peg of its currency, the renminbi, to the U.S. dollar and allow the renminbi to appreciate.

China’s exports have recovered more rapidly than those of most countries, partly because the low value of the renminbi has kept Chinese goods relatively inexpensive in foreign markets.

The rebound in Chinese exports has been so rapid that some factory executives in the Pearl River delta region near Hong Kong have begun complaining of shortages of empty steel containers in which to ship their goods. Container shipping companies have begun to raise freight rates and remove discounts introduced in response to the financial crisis.

“With the export recovery taking hold more strongly, the outlook for export manufacturing, ports and container shipping sectors appears to be brighter, compared to last year,” Jing Ulrich, the chairman of China equities and commodities at J.P. Morgan, said in a research note.

Imports in January rose impressively, in line with economists’ expectations, because imports a year ago were so weak. Many Chinese export factories nearly stopped buying raw materials then as their orders dried up, but they have been restocking since late spring.

Exports and imports both benefited this year from the timing of Chinese New Year, which will be Sunday. It fell on Jan. 26 last year, and a weeklong holiday at the end of January last year helped curtail economic activity in China.

The China trade surplus was $14.17 billion last month, compared with $18.43 billion in December and $39.1 billion in January of last year, according to figures released Wednesday by China’s General Administration of Customs.

The trade statistics are the latest sign of China’s robust economic health, even as most of the rest of the world struggles to recover from the financial crisis.

The China Association of Automobile Manufacturers announced Tuesday that auto sales in China had surged 143 percent from the level of a year earlier and production had leaped 124 percent.

A few analysts had expressed fears that auto sales might be weak in January because the government had partially rescinded a sales tax cut for cars with engines of 1.6 liters or less. Having cut the tax to 5 percent a year ago, from 10 percent, the government raised it to 7.5 percent at the start of this year.

But car ownership remains extremely popular in China, where personal incomes are rising and consumer confidence is strong. Car dealerships in China have weeks-long waiting lists for many models, and months-long waiting lists for some of the most popular models.

The A-share index on the Shanghai stock exchange closed 1.1 percent higher Wednesday, after getting an early boost from the auto sales figures, which had been released after the close of trading on Tuesday.

China’s snapshot of its January trade data Wednesday came the morning after Germany released official data confirming that it had lost its status as the world’s leading exporter, as China overtook it.

Chinese exports amounted to $1.2 trillion in 2009, while German exports totaled $1.1 trillion, the German Federal Statistical Office said.

Aside from China’s sheer size, it was the global economic downturn that propelled China past Germany as the top exporter. Germany’s main trading partners, the United States and the European Union, cut back on investments, while consumers trimmed their spending and banks reined in lending.

Judy Dempsey contributed reporting from Berlin.
Sign in to Recommend More Articles in Business » A version of this article appeared in print on February 11, 2010, in The International Herald Tribune.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on February 22, 2010, 08:26:45 AM
Here is a blog I've come across this morning. The writer compares GSL,SSW,DAC.

http://harbor.typepad.com/analysis/2009/12/containerized-shipping.html

Title: Re: ATCO - Atlas Corp
Post by: Packer16 on March 05, 2010, 09:36:21 PM
Has anyone run across a site that has current charter rates for ships?  TIA

Packer
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 08, 2010, 08:56:16 AM
Packer, here are 2 sources.  The first shows rates from German brokers , the next an article on generalized rates for different size ships.  Interesting that at the height of the market 3 mo. rates for 3500 teu was 100% > than SSW rates , but at moment
they are about 28% of SSW rates.  No wonder CSAV wants to renegotiate.

http://www.vhss.de/containership_time-charter-rates_eng.php#

Mostly small ships , but last chart shows rates for 3400 14t/teu

http://www.joc.com/maritime/container-ship-charter-rates-rise-demand
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 10, 2010, 07:15:37 AM
 Seaspan Corporation (NYSE:SSW - News) announced today the delivery of its 44th and 45th vessels, the Guayaquil Bridge and the COSCO Japan.

The Guayaquil Bridge, a 2500 TEU vessel delivered on March 5, 2010, was built by Jiangsu Yangzijiang Shipbuilding Co., Ltd. It is on charter to Kawasaki Kisen Kaisha Ltd. ("K-Line") of Japan under a ten-year, fixed-rate time charter. The Guayaquil Bridge is the first of seven Seaspan vessels to be chartered to K-Line.

The 8500 TEU COSCO Japan, which was constructed by Hyundai Heavy Industries Co., Ltd., was also delivered on March 5, 2010. The COSCO Japan is on charter to COSCO Container Lines Co., Ltd. ("COSCON") of China under a twelve-year, fixed-rate time charter. It is the third of eighteen vessels to be chartered by Seaspan to COSCON.

Title: Re: ATCO - Atlas Corp
Post by: Kiltacular on March 17, 2010, 08:38:51 AM
Seaspan reports:

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=452161

"- Achieved utilization of 99.7% for the quarter and year;

- Accepted delivery of seven newbuild vessels in 2009 and three vessels to date in 2010 to increase the operating fleet to 45 vessels. With the delivery of an additional 23 vessels, Seaspan is expected to grow its contracted revenue stream to approximately $7 billion;

- Strengthened our capital structure and financial flexibility through completion of the $200 million aggregate issuance of the Company's Series A Preferred Stock;

- Reduced our equity capital needs by up to 80% to $180 to $240 million from $900 million at the beginning of 2009. Deferred some of our equity needs by a year to second quarter 2012 from second quarter 2011;

- Paid a third quarter dividend of $0.10 per share on November 19, 2009;

- Paid a fourth quarter dividend of $0.10 per share on February 12, 2010, increasing cumulative dividends to $6.49 per share; ............................."
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on March 17, 2010, 10:01:48 AM
Thanks for the rates source gaf.  It looks like SSW is streaming along with a current CAD yield of 19% and low-end forward 23% yield if they finance the rest of their ships using equity only.  If this was trading like a triple-net real estate REIT at about an 8% yield, it would have a price in the low 20s on current yield and the high 20s on forward yield assuming all equity dilution (which management has stated they will avoid at all costs).  In addition, these guys are opportunistic buyers who could also buy up some capacity if it is available on a liquidation basis. 

Packer 
Title: Re: ATCO - Atlas Corp
Post by: RusticFrank41 on March 17, 2010, 11:43:22 AM
Packer, I'm not sure what you mean by a CAD 19% yield. SSW pays 40 cnts/yr and the price is $10. That's a 4% yield to me. You must be referring to something else? fdef
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 17, 2010, 12:08:19 PM
Rustic,

You need to have a look at distributable cash. It's more meaningful long term. Seaspan decreased their dividends significantly from $1.91/share to $.40.share. You are referring to the current yield ($.40/$10). Packer is concerning himself with what Seaspan has the ability to pay long term based on cashflows.

Remember, Seaspan cut the dividend opportunistically to retain the money within the company and to assist in paying for the newbuild commitments (which are already under charter). At some point Seaspan will have built and delivered all their newbuilds and they will have little need to retain capital in the business. It's extremely likely that Seaspan will then reinstate their higher distribution policy.

Realize that while dividends received have decreased recently, the company has continued to improve their financial strength over the last 18 months.

I think most retail investors are looking at current yields which I believe is a big mistake.

Packer, I can tell by your comments that you've mabye had your  "A Ha" moment with regards to Seaspan?  Let's hope we're right!

<IV
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 17, 2010, 12:23:49 PM
Sorry, I should have added this:

At some point Seaspan will have built and delivered all their newbuilds and they will have little need to retain capital in the business. It's extremely likely that Seaspan will then reinstate their higher distribution policy...

It's also likely that Seaspans distributable cashflow can grow north of their previous levels ($1.91/share) even including potential dilution. Over the next couple of years, the operating fleet of Seaspan will grow by at least 14 ships (I did the math on this in a previous post taking into account some pretty conservative assumptions, imo).

I think it's safest to just go with around $1.90/share again after dilution, but you can do the math any way you want to satisfy yourself.

In the end, it would appear there is a wide margin between the current yield, and the likely future yield including dilution. (nice margin of safety).
Title: Re: ATCO - Atlas Corp
Post by: mranski on March 17, 2010, 01:04:46 PM
Are you accounting for all depreciation in your analysis?

Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 17, 2010, 07:32:38 PM
mranski,

you can obtain the distributable cash for 2009 from the press release. About $155M. The company explains how that number is calculated as follows. (Note 2)

Cash available for distribution is a non-GAAP measure that represents
    net earnings adjusted for depreciation, amortization of deferred
    charges, non-cash undrawn credit facility fees, write-off of deferred
    financing fees on debt refinancing, non-cash share-based compensation,
    dry-dock adjustment, non-cash interest income, change in fair value of
    financial instruments, interest expense, cash interest paid at the
    hedged rate and other items that the Company believes are not
    representative of its operating performance. Please read "Reconciliation
    of Non-GAAP Financial Measures for the Quarter and Year Ended
    December 31, 2009 and 2008 - Description of Non-GAAP Financial
    Measures - A. Cash Available for Distribution" for a description of cash
    available for distribution and a reconciliation of cash available for
    distribution to net earnings.
Title: Re: ATCO - Atlas Corp
Post by: mranski on March 18, 2010, 09:46:58 AM
Thanks. What I was asking is why you analyze the value of this stock using cash flow instead and net income and p/e ratio. I've been in a number of trusts where cash flow and distributable cash seems very good but the net income isn't there and they eventually had to reduce distributions. To me this is a $10 stock earning $1 per share so it's earnings yield is 10%, a pretty fair valuation, undervalued maybe but not by a huge amount.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 18, 2010, 10:02:25 AM
After looking at FUR and Other REITs I would be fine marking down CAPEX significantly. We have $10 and $2 in cashflow. Replacement capex at depreciation seems a bit high to me, given that these are 30 year assets which can be sold during peaks of the market and bought during downturns. The question is whats a good percentage of depreciation to use for the markdown. Maintenance is already built into the Cashflow number.
Title: Re: ATCO - Atlas Corp
Post by: mranski on March 18, 2010, 11:22:48 AM
Correction, meant to type "cashflow instead OF net income and p/e ratio.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 18, 2010, 12:16:46 PM
The main reason to use cash flow, imo,  is because of SSW's use of interest rate swaps to cap interest at 6%.  These swaps are marked to market each qtr. and can add or subtract from normal earnings.  Plus this co. has historically paid out a high % of cf  in divs.  Once all funding for ships is taken care of , the div. will or at least I hope so be raised back up to the $1.90 level
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 18, 2010, 04:00:44 PM
what I should have written was , back to the 1.90 level that less>iv mentioned above.
This idea was Less > iv and J east's around a yr. ago now, and both have written  posts on SSW, with
Less>iv posting extensive numerical analysis.  I want to  thank both of you.  For I think this will be at least a 3 bagger on my original investment, and am looking to invest more.  
   The problem I had a year ago  was not understanding the interest swaps, and the possibility of charters breaking their contracts.  Still dont really have a grip on the swaps but they made it through the last yr. w/o problems with the counterparties and banks.  As to contracts , close to the worse yr. ever for container co. and no one , at least yet , has broken their contracts.  CSAV restructured and asked for a redo , but SSW said no and the contracts are intact.  HL also asked but were told no, and  for now the contracts are intact.   CSAV  at moment only has 2 ships on charter, with 2 more to be delivered which could be a problem but a small one.  So , this gives me confidence that the charter contracts are solid and  will remain in place for their time period.
    CEO Wang stated in the CC that there are 10 more ships to be delivered this yr. , and that some charter parties have asked for move ups to their delivery dates. So it appears with container prices improving the lines are thru the worst of the crisis and are ready to take their ships.  The over supply issue of idle ships is still there but slow steaming, scrapping and improved demand for containers is lessening its effect.  So I believe SSW is through the worst , and will start delivering their ships , increasing their cash flow and dividend.  As to numbers, even if they dilute up to 115 mil shares, and pay out 75% of cad(when all ships are delivered),  the div. should range from 1.70 to 1.95.  W/O dilution, much much better,
GAF
Title: Re: ATCO - Atlas Corp
Post by: JEast on March 19, 2010, 08:39:22 AM
gaf63,

Glad to have helped. To paraphrase Buffet, there are times when you should use a bucket and not a thimble. Though I was bullish 15+ months ago, I just used 'two' thimbles instead of the bucket. Irrespective of this fact, Seaspan is not super cheap presently, but still has a reasonable margin of safety and the future is starting to clear. In addition, the big cash flow is starting as the big ships are being delivered this year.

There are other more cheaply priced companies in the market that should bring more capital appreciation potential, but none are as solid or have the balance sheet and relationships, which I am of the belief that Seaspan has (i.e. top of the quality chain). When the distributions start to increase in the not too distant future, the Mutual Fund folks should return to the industry and Seaspan should shine. This still appears to be an excellent candidate for tax-deferred accounts and I have been in the market today buying for both tax-deferred and capital appreciation accounts.


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 19, 2010, 09:11:18 AM
Thanks. What I was asking is why you analyze the value of this stock using cash flow instead and net income and p/e ratio. I've been in a number of trusts where cash flow and distributable cash seems very good but the net income isn't there and they eventually had to reduce distributions. To me this is a $10 stock earning $1 per share so it's earnings yield is 10%, a pretty fair valuation, undervalued maybe but not by a huge amount.


mranksi,

it's pretty standard to analyze cash flows, especially free cash flows, in lieu of net earnings. there are lot's of reasons to do this. net earnings do not include allocations for capex and are easily manipulated by accounting conventions. in seaspans case, they use swaps to fix up their variable rate debt (for which they don't use hedge accounting) and consequently it creates significant swings in net earnings depending which way interest rates are moving. so, their net earnings are not a good proxy for the true cash flows within the business. if you then apply a p/e to an "e" that is skewed, your valuation becomes meaningless. a p/e is more useful as a relative valuation tool.  two companies in the same industry with similar accounting techniques could be compared using p/e's to assist in determing relative valuations.

this is why the company presents us with "distributable cash". they begin with the net earnings number as reported but adjust it for non-cash items etc... to give us a clearer picture of the true cash flows and operating performance of the business. cash flow is the bloodline of the business.

hope that helps a bit.
Title: Re: ATCO - Atlas Corp
Post by: mranski on March 19, 2010, 09:49:42 AM
thanks for the detail.  I'm used to analyzing using p/e for the most part on the stocks i look at. Depends on the business model i think.

Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 19, 2010, 09:54:52 AM
thanks for the detail.  I'm used to analyzing using p/e for the most part on the stocks i look at. Depends on the business model i think.



Mranski,

if you are interested, PM me and I'll send you my old CFA books on equity valuation which will help you out a lot. I'll even pay for the shipping if it's reasonable.

 ;D
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 19, 2010, 09:59:46 AM
Here are some good podcasts - 1 or 2 talks about why to use Free Cash Flow instead of Earnings. Have a listen they are pretty short and to the point.

http://www.gurufocus.com/news.php?author=Geoff+Gannon
Title: Re: ATCO - Atlas Corp
Post by: mranski on March 19, 2010, 12:21:11 PM
The Gannon stuff looks quite good at first glance, i'll review it in detail when I have a chance.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 25, 2010, 08:34:48 PM
http://www.investorvillage.com/uploads/25918/files/CSSSWMarch2010.pdf

Someone posted a Credit Suisse opinion on SSW as of March 16.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 29, 2010, 09:53:37 AM
http://www.bloomberg.com/apps/news?pid=20601109&sid=asR90b7attFI&pos=11

More on container ship shortage
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 31, 2010, 01:25:47 PM
Grenville,  this is the same news that SSW released on Mar. 15 when reporting their yr. end results.
So 2 week old news and negative at that, of course no mention of deliveries for this yr., or  the request to move up deliveries by
some lines
Gaf
Title: Re: ATCO - Atlas Corp
Post by: Grenville on March 31, 2010, 01:32:21 PM
Grenville,  this is the same news that SSW released on Mar. 15 when reporting their yr. end results.
So 2 week old news and negative at that, of course no mention of deliveries for this yr., or  the request to move up deliveries by
some lines
Gaf

Hey Gaf,

Thanks for the info. I didn't realize it was repeated info. I clearly haven't read the release on Mar.15 I'll delete the post.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on April 18, 2010, 08:28:23 AM
A while back I commented on the potential for super slow steaming to use up some of the container ships markets oversupply. Here is an article from the Journal of Commerce on this issue. As the article suggests, lots of new ships coming on board this year and next year but some oversupply definitely appears to be utilized.

http://www.joc.com/maritime/idle-containerships-fall-14-month-low

For balance, here is a second article estimating the time it will take to work off the total oversupply.

http://www.joc.com/maritime/overcapacity-last-years-says-oocl-chief

Cheers,

<IV

Title: Re: ATCO - Atlas Corp
Post by: gaf63 on April 22, 2010, 04:10:00 PM
Spot rates up, ship capacity lower on trans-Pacific routes,
slow steaming is helping and my original worries were unfounded
http://www.hellenicshippingnews.com/index.php?option=com_content&task=view&id=97458&Itemid=79
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on April 26, 2010, 07:44:29 AM
http://www.businessweek.com/news/2010-04-23/container-lines-will-win-higher-asia-u-s-rates-cosco-says.html


Container Lines Will Win Higher Asia-U.S. Rates, Cosco Says
April 23, 2010, 12:01 PM EDT
More From Businessweek
   
By Wendy Leung

April 24 (Bloomberg) -- China Cosco Holdings Co., Asia’s biggest shipping company by market value, said container lines will win a targeted increase in Asia-U.S. rates this year because of rebounding trade.

“We strongly believe that this year’s TSA rates goal can be achieved,” Executive Vice President Sun Jiakang told reporters in Hong Kong yesterday. The Transpacific Stabilization Agreement, a group of 15 shipping lines, is seeking an $800 per 40-foot box rates increase on Asia-U.S. west coast routes in annual contracts starting around next month.

China Shipping Container Lines Co. said this week that customers were accepting the increase after lines ended price wars that contributed to industrywide losses last year. Trade volumes have also jumped this year as U.S. consumers resume purchases of Asian-made toys, furniture and electronics amid the economic rebound.

“China Cosco and other shipping lines may have broken even in the first quarter given how strongly the container-shipping market has recovered,” said Jay Ryu, an analyst at Mirae Asset Securities Co. in Hong Kong. “The concern is what will happen after the summer peak season because there is still a lot of new capacity entering the market.”

Asia-Europe Rates

China Cosco successfully raised rates on transpacific routes in the first quarter, as well on Asia-Europe lanes and on some Asia-Pacific routes, Chief Financial Officer He Jiale said. Shipping lines were also able to add peak surcharges, he said.

“I’m full of confidence about this year’s outlook,” said Chairman Wei Jiafu. “The demand for sea shipments is rapidly increasing.”

China Cosco, also the operator of the world’s largest dry- bulk fleet, fell 2.3 percent to HK$10.02 in Hong Kong trading yesterday. The shipping line reported an annual loss of 7.47 billion yuan ($1.1 billion) a day earlier.

The company has no plans to cancel ship orders or to scrap other investments this year, He said. Last year, it canceled eight dry-bulk vessels as global overcapacity damped rates. Capital expenditure will drop 12 percent to 10.2 billion yuan this year, He said.

The Baltic Dry Index, a measure of commodity-shipping costs, will likely average around 3,000 this year, Wei reiterated. That’s about 15 percent higher than in 2009.

The company has said its container fleet, China’s largest, will likely boost volumes 8 percent this year to 5.67 million 20-foot boxes. Last year, volumes dropped 9.6 percent as the recession sapped world trade.

--With assistance from Kyunghee Park in Singapore. Editors: Neil Denslow, Suresh Seshadri

To contact the reporters on this story: Wendy Leung in Hong Kong at wleung12@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on April 26, 2010, 09:34:03 AM
SSW accepted their 47th ship last Friday , chartered  by COSCON


http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=463250
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on May 12, 2010, 04:38:26 PM
Interesting transaction Gerry got done for the sale and lease back of one of their large 13000 TEU ships.  The 12-yr time charter remains and the sale was valued at about $150M which will go a long way to covering the funding gap of $180-$240M for the remaining newbuilds! If Gerry & Sai can do one more deal like this then the capex funding gap will be closed and all that excess cashflow (from the dividend cut)  can be used to go shopping for cheap boats in an oversupplied market. Or, they could even begin to consider a dividend hike. I'd rather they go shopping though. This will allow the company to continue it's growth trend even during troubled times. They are roughly paying out about 20% of the free cash flow as a current dividend.

 I continue to gain more respect for this management team!

 :o

<IV
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 12, 2010, 05:39:42 PM
I had a listen to the conference call this morning.  These guys are very credible and competent.  Gerry Wang knows all the ins and outs of the shipping cycle.  They are also constantly pursuing diversification in the companies they lease to.   

A side note regarding the dividend.  Another board member pointed out to me that the management companies bonus is connected to the dividend.  The dividend has to be raised back to 0.40 c/quarter before management gets a bonus.  Management dropped the dividend last year to conserve capital.  In other words they put the company ahead of lining their own pockets.  Lord Voltemorte (he who shall remain nameless) could learn from this.

That being said, once they are able they will raise the dividend, rather than buying used ships.  I would think there is an upper limit to the number of ships they can get into long term leases (12 years) anyway, and they still have 21 coming down the pipe until 2013. 
Title: Re: ATCO - Atlas Corp
Post by: JEast on May 12, 2010, 06:27:11 PM
With respect to management incentives, you can find it in the 20-F filing on the SEC site.  In essence, the bonus has three (3) tiers and kicks in when the quarterly dividend starts to exceed $0.485 per share.

The incentive shares are entitled to a share of incremental dividends, based on specified sharing ratios, once dividends on our common shares reach certain specified targets, beginning with the first target of $0.485 per share, and the Company has an adequate operating surplus to pay such a dividend.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on May 12, 2010, 07:55:56 PM
I had a listen to the conference call this morning.  These guys are very credible and competent.  Gerry Wang knows all the ins and outs of the shipping cycle.  They are also constantly pursuing diversification in the companies they lease to.    

A side note regarding the dividend.  Another board member pointed out to me that the management companies bonus is connected to the dividend.  The dividend has to be raised back to 0.40 c/quarter before management gets a bonus.  Management dropped the dividend last year to conserve capital.  In other words they put the company ahead of lining their own pockets.  Lord Voltemorte (he who shall remain nameless) could learn from this.

That being said, once they are able they will raise the dividend, rather than buying used ships.  I would think there is an upper limit to the number of ships they can get into long term leases (12 years) anyway, and they still have 21 coming down the pipe until 2013.  

Hi Al,
Yes I'm definitely aware of the bonus structure but as you note, these guys have already shown us their willingness to sacrifice personal gain for the betterment of the company. And, I believe they will do it again. This company was started during the Asian crisis years ago and I believe Gerry and the gang are looking for a way to capitalize on the current state of the container ship leasing market. I would suggest that we could see a couple of acquisitions of cheap ships (if the right deals were presented) prior to a dividend increase. I think this is the best long term strategy for the company and these guys seems to do the right thing.

Growth was coming to SSW through the newbuilds for the last few years. Going forward, that's not likely to happen with large oversupply of ships in the marketplace.  I think its likely that we'll see some consolidation in the oversupply to the long term survivors. That's where I expect their forward growth to come from until the oversupply of ships is depleted.

 The good news here is both choices will benefit the shareholder on some level!   ;D
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 13, 2010, 09:55:59 AM
I listened to the call last night and bought today a small starter position today. I will triple down if it drops below 10. Kicking myself a bit for not paying attention to this one. It looks like a no braining and the lease transaction removes the dilution issue, and allows them to keep growing if they choose.

Its funny I have been watching DHT, OSG, KSP, and TNP for ways to play the shipping market. All, but TNP and possible KSP (at $7 or so, I own the options) are train wrecks compared to these guys. Thanks again for the tip, I should have paid attention sooner. The interest rate swaps really gum up the financial statements though.

I bought in my Roth and am hoping for a pull back, 20% Yield plus share price of $20 sounds great in 2011.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 14, 2010, 09:12:42 AM
In other words they put the company ahead of lining their own pockets. 

I guess they put the company ahead of lining their own pockets partly because share dilution would make a .475 dividend harder to attain.

I have a lot of SSW now -- I started buying a little below $10 and bought the rest up to an average of about $11.

I don't understand why it's so cheap.  It's not like it's hard to see the dividend power -- they say in the latest quarterly release that $40.368m cash was generated "available for distribution".  On today's price that's a 22% yield.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 14, 2010, 09:37:09 AM
I am guessing I will have a chance to double down in the next few days.
Title: Re: ATCO - Atlas Corp
Post by: Cardboard on May 14, 2010, 11:13:12 AM
"I don't understand why it's so cheap.  It's not like it's hard to see the dividend power -- they say in the latest quarterly release that $40.368m cash was generated "available for distribution".  On today's price that's a 22% yield."

I believe that there are 3 issues or concerns by the market holding this one back:

1- They rely on big international banks to lend them money for the ships that remain to be delivered. These lines of credit could be cut if banks run into trouble. Similar to when the banks did not want to provide funds on some private equity deals because they were tight for cash.

2- Some ships will come for renewal over the next few years. Current spot rates are lower than these leases, so terms on renewal should be less favourable. This one is also linked to the strength of the Chinese economy.

3- They need to raise $140 million in equity between mid 2011 and mid 2012. It creates uncertainty since we don't know what will be the terms. However, it has been decreased from the $180 to $240 million range that they provided before which is excellent news.

These 3 things all have macro all over them, so despite a structure that seems to deliver free cash no matter what, it seems to explain why SSW swings so much when the market gets scared.

Another concern for me are these $200 million preferreds convertible at $15. They also pay 12%. So the "parent" did help Seaspan to get through this crisis, but it is not like it was free.

Nonetheless, it seems cheap to me as well. I figure that they could make $3 in FCF by mid 2012. That is assuming some bumps along the way, so it is attractive.

Cardboard

Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 15, 2010, 02:08:39 PM

3- They need to raise $140 million in equity between mid 2011 and mid 2012. It creates uncertainty since we don't know what will be the terms. However, it has been decreased from the $180 to $240 million range that they provided before which is excellent news.



The Q1 2010 conference call transcript addresses this uncertainty a bit:


Matt Troy – Citigroup

The timeframe, is it possible to assume that you could have addressed the majority portion of that $140 million by the end of this year? I know obviously there are various moving parts and pieces, market variables where rates are, what the markets look like. In terms of timeframe is it reasonable to assume that 2010 will see the majority of that addressed or is it more of a 2011 solution?

Gerry Wang

We’re very confident that this will be taken care of before the end of this year but one thing I want to highlight to you and to the audience here; what we are trying to do is not just taking care of the equity requirements starting from mid year 2012 what we want to do is really to create additional fire power for the company to take care advantage of the opportunities that arise from the distressed situations that I have just mentioned in terms of the unavailability of financing for some of the new building vessels that are under construction or that have already been finished in terms of construction. That’s our set plan and we’ll continue to be very diligent and to make sure that whatever we do is not going to dilute our existing shareholders.


They also provided a forecast for 2013, after all the ships have been delivered:

We expect to exceed approximately $700 million for year of contracted revenues, $500 million of EBITDA and $300 million of distributable cash flow starting from the year 2013 when all our new builds are delivered.
Title: Re: ATCO - Atlas Corp
Post by: JEast on May 16, 2010, 08:39:43 AM
As an FYI for the some to the potential 4,250 TEU renewals coming up, note that on the conference call the company indicated that current rates (subject to change) were in the $20K p/day range for these vessels.  Currently for the Hapag-Lloyd and CSCL Asia vessels they are currently earning below market rates in the $18K range.  I would suspect presently that the liner majors are weighing their options and may renew on fairly reasonable rates and reason the company sounded optimistically.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 18, 2010, 04:45:46 PM
Very interesting data

http://www.seaspancorp.com/fleet-list.php

Im not one for spreadsheets and number crunching, but from eyeballing things the new ships that have come online in April and May are extremely profitable. The ones coming on for the rest of 2010 and 2011 are just as nice as well.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 18, 2010, 05:07:12 PM
I think their just bigger ships Myth.  The lease prices look only marginally higher over time on the same size of boats.  Suffice to say, each working boat generates a similar amount of distributable cash per unit size.  So, the more the merrier, assuming they all get leased immediately which they seem to. 
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 18, 2010, 05:55:27 PM
I was more looking at the op ex rates vs the charter in rates. The bigger ones are more efficient and generate more revenue per op ex which is why I said they were more profitable, then again we dont get much detail on the interest expense, but I am guessing its still more revenue per costs. Some of the larger classes generate 2x the charter rate at only a bit more op ex. Which means for every ship coming online (interest expense not being considered) we should get more dropped to the bottom line.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 18, 2010, 07:41:39 PM
I get you now...Thanks
Title: Re: ATCO - Atlas Corp
Post by: Grenville on May 18, 2010, 09:38:18 PM
I may have asked board members before, but I can't remember the answer or the logic.

How do you guys feel about the preferred offering Seaspan did in 2009? It doesn't give me a ton of confidence in management when they sold such a nice chunk of the company to insiders. The terms of the offering were $200 million of prefs that pay 12% interest payable in shares and a conversion price of $15. It's a nice vehicle to compound ownership interest.

Based on the interest of the board in SSW at current prices, it doesn't seem like the conversion price of $15 was set high. I just wouldn't be happy if a company like Fairfax did the same sort of deal with insiders getting such great terms unless they were offered to other shareholders.

I'm curious to learn how you guys think about the offering and your confidence in the future with regards to management and the large shareholders.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939 (http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939)
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on May 28, 2010, 01:04:52 PM
Dennis Washington's  Deep Water purchased another 399,000 shs. in May

http://ir.seaspancorp.com/secfiling.cfm?filingID=950130-10-1210
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 29, 2010, 06:43:56 AM
I may have asked board members before, but I can't remember the answer or the logic.

How do you guys feel about the preferred offering Seaspan did in 2009? It doesn't give me a ton of confidence in management when they sold such a nice chunk of the company to insiders. The terms of the offering were $200 million of prefs that pay 12% interest payable in shares and a conversion price of $15. It's a nice vehicle to compound ownership interest.

Based on the interest of the board in SSW at current prices, it doesn't seem like the conversion price of $15 was set high. I just wouldn't be happy if a company like Fairfax did the same sort of deal with insiders getting such great terms unless they were offered to other shareholders.

I'm curious to learn how you guys think about the offering and your confidence in the future with regards to management and the large shareholders.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939 (http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939)


Hi Grenville, I am not trying to rationalize this or defend it but I think we need to view it in context.  The time when they needed the cash was right in the middle of the credit crisis.  If they had issued an open rights or warrant offering, or an IPO, the stock would have really been hammered and the dilution may well have been much greater.  By doing it this way they contained the damage and were still able to proceed with the new build program.  This was only a month or so after Buffett loaned GS and GE money at similarly lucrative terms.  So, if the Washington Family wanted to make a similar deal somewhere else they could have.  Rather they chose to invest in the company they know so well which is a vote of confidence, or desperation.

FFH has done similar deals right at the bottom of the market that have pissed me off such as selling a huge number of common shares to MKL and Longleaf at insanely low prices.  They never phoned and offered me the same deal.  In that case though poetic justice came into play and I was able to by a flier on the stock at prices around what their friends paid. 

Al.
Title: Re: ATCO - Atlas Corp
Post by: Grenville on May 29, 2010, 11:04:33 AM
I may have asked board members before, but I can't remember the answer or the logic.

How do you guys feel about the preferred offering Seaspan did in 2009? It doesn't give me a ton of confidence in management when they sold such a nice chunk of the company to insiders. The terms of the offering were $200 million of prefs that pay 12% interest payable in shares and a conversion price of $15. It's a nice vehicle to compound ownership interest.

Based on the interest of the board in SSW at current prices, it doesn't seem like the conversion price of $15 was set high. I just wouldn't be happy if a company like Fairfax did the same sort of deal with insiders getting such great terms unless they were offered to other shareholders.

I'm curious to learn how you guys think about the offering and your confidence in the future with regards to management and the large shareholders.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939 (http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939)


Hi Grenville, I am not trying to rationalize this or defend it but I think we need to view it in context.  The time when they needed the cash was right in the middle of the credit crisis.  If they had issued an open rights or warrant offering, or an IPO, the stock would have really been hammered and the dilution may well have been much greater.  By doing it this way they contained the damage and were still able to proceed with the new build program.  This was only a month or so after Buffett loaned GS and GE money at similarly lucrative terms.  So, if the Washington Family wanted to make a similar deal somewhere else they could have.  Rather they chose to invest in the company they know so well which is a vote of confidence, or desperation.

FFH has done similar deals right at the bottom of the market that have pissed me off such as selling a huge number of common shares to MKL and Longleaf at insanely low prices.  They never phoned and offered me the same deal.  In that case though poetic justice came into play and I was able to by a flier on the stock at prices around what their friends paid. 

Al.

Hey Uccmal,

I appreciate hearing your viewpoint on the transaction! Good points and I agree context is key. I'm going to look at the details of the offering a little closer and go back and look at the FFH equity raise. I just want to think about these financing deals the right way.

-G

Title: Re: ATCO - Atlas Corp
Post by: twacowfca on May 29, 2010, 01:35:01 PM
I may have asked board members before, but I can't remember the answer or the logic.

How do you guys feel about the preferred offering Seaspan did in 2009? It doesn't give me a ton of confidence in management when they sold such a nice chunk of the company to insiders. The terms of the offering were $200 million of prefs that pay 12% interest payable in shares and a conversion price of $15. It's a nice vehicle to compound ownership interest.

Based on the interest of the board in SSW at current prices, it doesn't seem like the conversion price of $15 was set high. I just wouldn't be happy if a company like Fairfax did the same sort of deal with insiders getting such great terms unless they were offered to other shareholders.

I'm curious to learn how you guys think about the offering and your confidence in the future with regards to management and the large shareholders.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939 (http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939)


Hi Grenville, I am not trying to rationalize this or defend it but I think we need to view it in context.  The time when they needed the cash was right in the middle of the credit crisis.  If they had issued an open rights or warrant offering, or an IPO, the stock would have really been hammered and the dilution may well have been much greater.  By doing it this way they contained the damage and were still able to proceed with the new build program.  This was only a month or so after Buffett loaned GS and GE money at similarly lucrative terms.  So, if the Washington Family wanted to make a similar deal somewhere else they could have.  Rather they chose to invest in the company they know so well which is a vote of confidence, or desperation.

FFH has done similar deals right at the bottom of the market that have pissed me off such as selling a huge number of common shares to MKL and Longleaf at insanely low prices.  They never phoned and offered me the same deal.  In that case though poetic justice came into play and I was able to by a flier on the stock at prices around what their friends paid. 

Al.

Hey Uccmal,

I appreciate hearing your viewpoint on the transaction! Good points and I agree context is key. I'm going to look at the details of the offering a little closer and go back and look at the FFH equity raise. I just want to think about these financing deals the right way.

-G




Context is everything.  M. P. Did a similar transaction to try to save Delta Finance and lost his shirt.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on July 31, 2010, 10:46:34 PM
"I don't understand why it's so cheap.  It's not like it's hard to see the dividend power -- they say in the latest quarterly release that $40.368m cash was generated "available for distribution".  On today's price that's a 22% yield."

I believe that there are 3 issues or concerns by the market holding this one back:

1- They rely on big international banks to lend them money for the ships that remain to be delivered. These lines of credit could be cut if banks run into trouble. Similar to when the banks did not want to provide funds on some private equity deals because they were tight for cash.

2- Some ships will come for renewal over the next few years. Current spot rates are lower than these leases, so terms on renewal should be less favourable. This one is also linked to the strength of the Chinese economy.

3- They need to raise $140 million in equity between mid 2011 and mid 2012. It creates uncertainty since we don't know what will be the terms. However, it has been decreased from the $180 to $240 million range that they provided before which is excellent news.

These 3 things all have macro all over them, so despite a structure that seems to deliver free cash no matter what, it seems to explain why SSW swings so much when the market gets scared.

Another concern for me are these $200 million preferreds convertible at $15. They also pay 12%. So the "parent" did help Seaspan to get through this crisis, but it is not like it was free.

Nonetheless, it seems cheap to me as well. I figure that they could make $3 in FCF by mid 2012. That is assuming some bumps along the way, so it is attractive.

Cardboard



I keep coming back to your comments here.  Thanks for the help.

#1 is worrying me.  The CEO is aggressive-- acquiring another ship opportunistically and then hiking the dividend before letting us know that he has his ducks in a row on the ships he ordered in 2007 -- you know, the ones he had to cut the dividend for.  Then talking about wanting another 20 or 30 ships.  Maybe he's already pulled off a new financing deal and not mentioned it, but it is starting to make me question whether he is exercising enough caution.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 22, 2010, 08:58:48 AM
There is some news today -- expected, but welcome anyhow:

HONG KONG, CHINA--(Marketwire - 10/22/10) - Seaspan Corporation (NYSE:SSW - News) announced today that it has signed two financing transactions that position the Company to fully finance its built-in fleet growth and increase its financial flexibility.


http://finance.yahoo.com/news/Seaspan-Transactions-iw-4049444085.html?x=0&.v=1
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 26, 2010, 09:15:39 AM
That financing deal and the apparent need not to dilute shareholders anymore has put a real fire under the stock.  I have held this for about two years and watched it do nothing until last week.  I wonder if a dividend increase will be coming?
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on October 26, 2010, 09:37:19 AM
I am a happy camper. This is one of my largest holdings. I think we will see consistent dividend increases as long as new ships come online. I am up about 30% or so and have been adding along the way. $2 in divs will look great versus my basis, and given where REITs trade it could do wonders for the share price.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 26, 2010, 09:55:20 AM
This one is fueling my returns this year.  I had a 50% portfolio weighting with cost basis of $11 when it was trading at $10 this summer.

I was just checking the newbuild order book:
http://www.seaspancorp.com/fleet-newbuild-orderbook.php

It looks like by this time next year they'll have most of the ships in place.  Should be good for another 50%-100% return from here.

So I haven't sold anything.
Title: Re: ATCO - Atlas Corp
Post by: UhuruPeak on October 26, 2010, 11:15:15 AM
This one is fueling my returns this year.  I had a 50% portfolio weighting with cost basis of $11 when it was trading at $10 this summer.

Eric, it always amazes how willing you are to still bet big on some companies even now that you don't need to grow the portfolio anymore.  Btw, are you not in BAM anymore? Every time I see the quotes I want to kick myself for not having followed you last year when you mentioned it!

PS: also long SSW, large-ish line, clearly helping my performance this year as well
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 26, 2010, 01:57:00 PM
even now that you don't need to grow the portfolio anymore.  

Need vs Want.  It's a struggle to keep them in check.

My grandmother has a very expensive property near Sydney with a view to the west overlooking Pittwater that's been in the family since 1949 (my father and grandfather built it themselves) -- it's a 5 minute walk down to Whale Beach.  This is where I've been spending a month the past few North American winters.  She is 93 and the place is expensive -- I want to keep it in the family when the time comes, and I'm trying to beat the clock.  I've been taking vacations there ever since I was 6 months old -- I have a lot of memories there.  I don't really need the property, but I want it.  It would cost 1/3 of my present net worth -- so I'm trying to grow it.

Not in BAM anymore, sold it along the way to buy ICO (not in that anymore either).  I would have done well if I'd kept it in BAM, but I did slightly better with ICO because it worked out sooner and I made further gains with the money after I sold ICO.


Title: Re: ATCO - Atlas Corp
Post by: Myth465 on October 26, 2010, 05:13:55 PM
Eric has the best ideas on concentration and risk that I have come across.
Title: Re: ATCO - Atlas Corp
Post by: UhuruPeak on October 26, 2010, 07:39:17 PM
Eric has the best ideas on concentration and risk that I have come across.

No argument from me there!
Title: Re: ATCO - Atlas Corp
Post by: finetrader on October 27, 2010, 06:39:28 AM
You guys are becoming more and more convincing!
I'm quite late to this one but have join the party this morning by opening a position.  (not the first to do it, but hopefully not the last!)

For me, distributable cash is equivalent to cash flow from operations. (would take out a few elements like share-based compensation though)
If I get it properly, the thesis on SSW is that they should have about 300M$ distributable cash in about 2 years.
Would be nice to have a sense of the free cash flow generation then.
Way to do it would be to take distributable cash minus maintenance capital expense (ex:new vessel replacing old one)
A quick glance tells me that FCF is quite high as the majority off the new vessels is adding to the float as opposed to replacing an old on)
Any guidance regarding FCF?
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on October 27, 2010, 08:53:00 AM
They have a presentation online that they update quite often

http://files.shareholder.com/downloads/SSW/1049196086x0x412574/f8dd52cc-e6ee-4204-b8aa-fb63efca1cd3/SSW_Q3_10_Presentation_-_FINAL.pdf

http://files.shareholder.com/downloads/SSW/1049196086x0x409788/10ff9790-5417-4c1b-b036-66088c4546ec/LATEST_Seaspan_Company_Presentation_September_2010_FINAL.PDF

You are right though, its not broken out or clarified. I assume it includes maintenance, interest, and all cash expenses (similar to a reit, and I believe Maintenance Capex would be Dry Docking). As far as replacement, these assets last 30 years. You may want to call Investor Relations, thats a good question.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 27, 2010, 10:13:19 AM
I'm wondering how much money could be realized by scrapping their fleet.

Here is an article from late 2008
http://blogs.telegraph.co.uk/finance/theasiafile/5990607/Container_ships_are_a_load_of_old_scrap/

Quoting:
A leading executive from one of China’s biggest shipbuilding and operating firms told me that some analysts fear that even brand new $100m container ships may be worth more as scrap metal than ocean-going transports.

I'm not really sure how much of a discount the ships sold for, but I'm guessing it wasn't greater than 70%.  So let's say it's like 30% of the market price of a new ship -- were brand new $100m ships going for $30m in late 2008?  Or were they going for more, like let's say 40%?  Somewhere in there perhaps is the truth... and if the quote is accurate then scrap value is somwhere between 30% or 40% of the cost of a new ship.  Or perhaps this is a completely wrong assumption... can somebody help me out here?

Here is what I'm getting at...  steel prices will likely triple (or more) in nominal terms over 30 years.  They might be depreciating these ships on paper, but I think in reality there will be no depreciation.

Their fleet on average is only 5 years old.  Therefore, I'm sort of banking on the cash flow to be entirely distributable to shareholders and let the depreciating dollar (rising steel prices) pay off the cost of these ships (cancel all of the debt upon scrapping in addition to return of invested capital).

Who knows, perhaps scrap value will be substantially higher than the initial cost of the ship?


Title: Re: ATCO - Atlas Corp
Post by: Myth465 on October 27, 2010, 10:30:31 AM
In the inflation thread, when you said in High Inflation for a long period of time, SSW may be able to scrap 1 ship and payoff there debt. That really got me thinking, and provides a decent floor / security. Hopefully the older ships are scrapped, increasing cash flow when rates adjust upwards.
Title: Re: ATCO - Atlas Corp
Post by: finetrader on October 28, 2010, 09:27:20 AM
'Therefore, I'm sort of banking on the cash flow to be entirely distributable to shareholders and let the depreciating dollar (rising steel prices) pay off the cost of these ships (cancel all of the debt upon scrapping in addition to return of invested capital).'

Sounds like a good plan.  But i'm not sure about the rusting effect on the metal though. I mean, scrapping a 30 year old rusted ship most probably is worth much less than scrapping a brand new one.

gonna try to find info about it..
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 28, 2010, 09:53:52 AM
This stock is behaving in Mr. Market's usual baffling manner.  The earnings, cash flow, and distributable cash are entirely as expected, and as forecast, probably better with the refinancing risk reduced.  And the stock sells off.  Business too boring and predictable? 

The questions from analysts are at their usual level of stupidity as well.  They cannot seem to get it through their heads that Seaspan leases ships at long term locked in rates.  As such, spot prices, and short term rate fluctuations, and utilization rates are of little relevance unless they persist for years.

http://seekingalpha.com/article/232859-seaspan-ceo-discusses-q3-2010-results-earnings-call-transcript
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 28, 2010, 10:12:26 AM
'Therefore, I'm sort of banking on the cash flow to be entirely distributable to shareholders and let the depreciating dollar (rising steel prices) pay off the cost of these ships (cancel all of the debt upon scrapping in addition to return of invested capital).'

Sounds like a good plan.  But i'm not sure about the rusting effect on the metal though. I mean, scrapping a 30 year old rusted ship most probably is worth much less than scrapping a brand new one.

gonna try to find info about it..

On the conference call he talked about the major liners replacing 25 to 30+ yr old ships -- not because of rust, but because they are simply inefficient.  They are harder to load, they are not fuel efficient, and relatively high polluters.  True there would be some rust but my guess is that these commercial ships are maintained fairly well and rust would be superficial.

I hope you find the scrap estimates -- perhaps in the quarterly or annual reports there will be mention of cash flows from scrapping old ships.  Those ships are probably depreciated to zero so the scrapping should show up as a taxable gain.
Title: Re: ATCO - Atlas Corp
Post by: doc75 on October 28, 2010, 10:28:05 AM
This stock is behaving in Mr. Market's usual baffling manner.  The earnings, cash flow, and distributable cash are entirely as expected, and as forecast, probably better with the refinancing risk reduced.  And the stock sells off.  Business too boring and predictable? 

The questions from analysts are at their usual level of stupidity as well.  They cannot seem to get it through their heads that Seaspan leases ships at long term locked in rates.  As such, spot prices, and short term rate fluctuations, and utilization rates are of little relevance unless they persist for years.

http://seekingalpha.com/article/232859-seaspan-ceo-discusses-q3-2010-results-earnings-call-transcript

I really appreciate Mr. Market some days...

I generally feel we're heading for a serious contraction in the market but couldn't resist picking up some SSW today.  I noticed that Wells Fargo downgraded them today based on the recent upswing and the expected seasonal wallow.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on October 28, 2010, 01:04:06 PM
As you said Uccmal they dont understand SSW
here is a quote from the Wells downgrade

"as seasonality runs its course through the containerized freight complex" and
"we believe further value recognition may occur at a slower pace for the time being, particularly as seasonally lower freight volumes potentially cut some of the froth from the container sector"

And below is a comment from Seeking Alpha, and part of the  good news is that COSCO wants their ship deliveries moved forward, hopefully that is possible,


http://seekingalpha.com/article/232917-six-key-points-from-seaspan-s-3q-2010-earnings-call?source=yahoo
Title: Re: ATCO - Atlas Corp
Post by: biaggio on October 29, 2010, 04:46:47 PM
Are there any public companies that scrap old vessels? I was thinking that may be a good business to be in.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 29, 2010, 06:14:01 PM
I found some data on scrap prices in July 2007 (only source I found yet).  Looks like it's in the $425/ton range.

See page 11:
http://www.robindesbois.org/english/shipbreaking9.pdf

I don't know how much these ships weigh, but I have the feeling that the scrap value is nowhere near as high as 1/3 the cost of a new vessel.  Unless a $100m vessel weighs 77,000 tons! (I think not).
Title: Re: ATCO - Atlas Corp
Post by: biaggio on October 30, 2010, 06:59:12 AM
updated article (april 2010) on scrapping ships:

http://metalsplace.com/news/articles/33620/steel-scrap-business-booming/

"The best time to invest has gone. When everyone is optimistic, the profit ratio will go lower and lower. Overall the price of the iron and steel scrap has already increased to a high that is risky to gamble on," he said, estimating it may surge to $800 per ton this year.
Title: Re: ATCO - Atlas Corp
Post by: biaggio on October 30, 2010, 07:06:45 AM
article that might help you.

 http://virginiahughes.files.wordpress.com/2007/09/shipshape.pdf


"In an empty container ship that
weighs about 18,000 tons, for instance, about 14,000 tons of
that weight comes from the steel. "
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on October 30, 2010, 09:25:52 AM
I see no comfort in the steel. When they need to really scrap ships, everyone else will and steel prices will fail quite a bit. Check out OSG. They kept repurchasing below scrap value and then it all evaporated. They ended up issuing a ton of shares at half of what they were buying them back at.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 30, 2010, 10:01:15 AM
I see no comfort in the steel. When they need to really scrap ships, everyone else will and steel prices will fail quite a bit. Check out OSG. They kept repurchasing below scrap value and then it all evaporated. They ended up issuing a ton of shares at half of what they were buying them back at.

There are a couple of scenarios -- there's the scrap in times of distress (what you are referring to), and then there is the practice of just running the ships for 30 years and then scrapping when they are obsolete.

The question is... will the scrap value retire the debt used to finance the ship?  If not, then what does this "cash distributable to shareholders" really mean?  Does it mean that if entirely paid out we'll just stiff the banks that financed the ships?  Or does it mean that management assumes scrap value will be greater than the debt owed?  Or does it mean that management is exaggerating how much money can be paid out?

Title: Re: ATCO - Atlas Corp
Post by: Packer16 on October 30, 2010, 10:01:35 AM
I just performed an interesting comparison of SSW to other ship leasing firms (primarily in Singapore) - Pacific Shipping Trust, First Shipping Trust and Rickmers Marine.  Pacific Shipping Trust (the closest comp but still not as high quality as SSW) is selling at 11% of distributable CFs.  The other trusts have credit re-negotioation issue more akin to GSL.  If we apply the 11% to SSWs estimated $300m distributable cash flow implies a value of close to $30 per share.   And this is still a higher yield than other income based alternatives like REITs.   Another data point is the proposed IPO of Costamere.  This firm has shorter leases with less creditworthy customers and will be valued must higher than SSW if it goes out at the current IPO range.

Packer  
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 30, 2010, 10:17:21 AM
I have trouble comparing SSW to a REIT because you don't scrap an office tower after 30 years.  That's why I'm possessed with this quest to figure out what the terminal value of these ships are.

Assuming zero inflation (to make it simple to understand), with the REIT you'll still have your book value intact after 30 years even if you pay out all the cash flow.  With SSW, you won't -- your scrap value won't be enough to cover the debt, so terminal book value is likely negative.

Therefore, I would assume a REIT should trade at a richer valuation relative to cash flow.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on October 30, 2010, 11:15:03 AM
Eric and Parker these are really good points, especially the one relating to the REIT comparison. Perhaps pipelines or toll roads (which eventually wear out) is a better comparison. I think if you leave inflation in the equation then scrap value will cover BV 30 years later. Either way you raise a good point, the real question is what is maintenance capex. I believe the maintenance of the ships is in the dry docking expenses but how will they replace these ships when they wear out. Sure its 20 years away but its a good question, and one I dont have the answer to. Wouldnt the debt repayment include some sort of principle portion?
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on October 30, 2010, 12:17:06 PM
One way to make the adjsutment to RE is to estimate the CF after debt amortization to pay-off the debt associated with the ships.  If we use the 3Q debt of $2.4b and divide by the avg ship remianing life (27 years) we get $87m or 40% of currnet distributable CF of $200m.  In 2013, SSW will have $300m of dist CF so the net after debt service will be closer to $180 million.  If we cap that by 8% yield on RE, we get a value of $25.  Alternatively if we use the Singapore ship lease distributable CF yield of 13% we get about the same amount ($25).   If there is a lower yield on RE, the value will be higher.  Either way this is showing SSW is about 50% lower than the Singapore comps or the equivalent RE yeild.

Packer
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 30, 2010, 04:29:46 PM
One way to make the adjsutment to RE is to estimate the CF after debt amortization to pay-off the debt associated with the ships.  If we use the 3Q debt of $2.4b and divide by the avg ship remianing life (27 years) we get $87m or 40% of currnet distributable CF of $200m.  In 2013, SSW will have $300m of dist CF so the net after debt service will be closer to $180 million.  If we cap that by 8% yield on RE, we get a value of $25.  Alternatively if we use the Singapore ship lease distributable CF yield of 13% we get about the same amount ($25).   If there is a lower yield on RE, the value will be higher.  Either way this is showing SSW is about 50% lower than the Singapore comps or the equivalent RE yeild.

Packer

Regarding $300m distributable cash flows in 2013 -- it's $290m (at least) distributable cash flow in 2012.  Those last 3 ships are delivered in January, March, and April 2012.  Each one produces cash flow of $46,545 per day.  So that's looking like maybe $10m maximum cash flow that they're missing out on in 2012 (vs 2013).  Then on the conference call they indicated that COSCON wants the ships delivered sooner, leaving open the possibility that all ships are delivered by end of 2011.

One thing I think we forgot to include is the cut that management gets when they pay the cash out.  $300m distributable to shareholders -- that's somewhat of a fiction if management is going to take a swipe at it in transit as their bonus.  Perhaps they should rephrase it as "distributable to both shareholders and management".  Does the Singapore company you mention have a similar bonus arrangement?





Title: Re: ATCO - Atlas Corp
Post by: Packer16 on October 30, 2010, 05:30:33 PM
In the conf call, management stated that in 2012 they expect the distributable CF to exceed $300m.  I dont know if that includes some items not included in your estimate.  In the conf call, they also stated diluted effects as increasing over time (I guess assuming the bonus is paid in shares).  Yes the Singapore firms have a similar fee structures paying a certain % of lease income per year with incentive for higher distribution per year.  SSW has a daily fixed fee per vessel plus incentive fee. 

Given your Australian connection, do you have any insights into Village Roadshow Ltd. as they are selling from what I can estimate at about 2.5x FCF (which is pretty cheap for an entertaiment/media firm)?   Thx.

Packer
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 30, 2010, 10:07:19 PM
In the conf call, management stated that in 2012 they expect the distributable CF to exceed $300m.  I dont know if that includes some items not included in your estimate.  In the conf call, they also stated diluted effects as increasing over time (I guess assuming the bonus is paid in shares).  Yes the Singapore firms have a similar fee structures paying a certain % of lease income per year with incentive for higher distribution per year.  SSW has a daily fixed fee per vessel plus incentive fee. 

Thanks for finding this comparison to the Singapore firms.  Useful information.

Given your Australian connection, do you have any insights into Village Roadshow Ltd. as they are selling from what I can estimate at about 2.5x FCF (which is pretty cheap for an entertaiment/media firm)?   Thx.
Packer

No, sorry.

Title: Re: ATCO - Atlas Corp
Post by: gaf63 on October 31, 2010, 01:01:14 PM
As to the cash flow, Sai Chu used the phrase "distributable cash" in the CC, and also states that they wont payout 100% to shareholders, that some will be held for cap ex, no mention of using it for debt repayment however. 
Anyway, a 2/3 payout of cf would be over $2/sh with no dilution beyond the preferred's conversion
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on October 31, 2010, 02:37:12 PM
no mention of using it for debt repayment however. 


It sounds like they are telling the market to expect the debt will be rolled over.  The caller gave Mr. Wang the opportunity to say something conservative regarding repayment of debt but instead he just talked about rolling it.  So in terms of retained cash flows, I figure they'll buy new ships with it.  So it sounds like growth.


From the CC:

Urs Dur – Lazard Capital Markets

All right. It was more of a question and that's a great point, Gerry. And I hope you – I think I might have been slightly misunderstood. If you – you have some debt maturities coming up in 2015, I believe. Let's just say it is 2015 today in today's bank environment and those ships are five years older, would you feel confident in the ability, given the length of the contracts you have remaining on those vessels that are encumbered, that you'd be able to redo that debt at this time, or would that be more challenging?

Gerry Wang

We think we should be quite easily doing the debt renewal given the charter profile that has with those ships and also our own overall balance sheet in terms of financing capital structure.

Title: Re: ATCO - Atlas Corp
Post by: finetrader on November 01, 2010, 10:52:04 AM
here is a good link for shipbreaking:

http://en.wikipedia.org/wiki/Ship_breaking

also:
http://en.wikipedia.org/wiki/Tonnage
'Lightship or Lightweight measures the actual weight of the ship with no fuel, passengers, cargo, water, etc. on board.'

it seems like a 5050 TEU weight about 20000 tons:

http://www.allbusiness.com/transportation-equipment-manufacturing/ship-boat-building/294826-1.html
'The ship has a lightweight tonnage of 20,112 tons, with 65 per cent of the steel being high tensile. '

All things considered (cost to dismantle a ship, environmental issues)  I don't think there is a lot a value scraping a ship. Maybe a few millions here and there.
How much would you pay for a ship if you are a scraping company? Certainly no more than half the scrap value of the metal.
Title: Re: ATCO - Atlas Corp
Post by: tengen on November 02, 2010, 01:07:08 PM
Here is a blog I've come across this morning. The writer compares GSL,SSW,DAC.

http://harbor.typepad.com/analysis/2009/12/containerized-shipping.html

The author of the blog post was spot on. DAC has done nothing, SSW has performed well, but GSL is taking off into the stratosphere.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on January 05, 2011, 10:54:49 AM
I am actually not too happy about this move up. We are up 10% over the last 3 days or so. I noticed that Options are dirt cheap on high yield stocks and was going to trade into August options for this and leaps for FTR. This move has cost me 30-40% on SSW within 3 days. I figure these will continue to trade up as long as yields are low and management appears to be making the right moves.

I think I will hold on to my shares given the move, was wondering what sent it down over the last 2-3 weeks and wanted to add.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on January 05, 2011, 11:41:30 AM
Thanks Parsad!

Title: Re: ATCO - Atlas Corp
Post by: JEast on January 05, 2011, 04:28:34 PM
As this post is now in the idea section, and I was the originator - I suppose that the full disclosure be presented.  As such, attached is the original white paper.  Though a little dated at this juncture, I am of the belief that much of the thesis is still intact even at current prices.

Feedback and critic is always welcomed from fellow board members.


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: jasonw1 on January 05, 2011, 08:55:27 PM
Thanks JEast and fellow board members for SSW idea, bought some and had order for more at $12 but it just took off. I guess I shouldn't complain too much when your holdings are going up.  :)

Has anyone looked at another shipping stock, NNA? I recently bought some @ <$4.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on January 06, 2011, 07:01:12 AM
As this post is now in the idea section, and I was the originator - I suppose that the full disclosure be presented.  As such, attached is the original white paper.  Though a little dated at this juncture, I am of the belief that much of the thesis is still intact even at current prices.

Feedback and critic is always welcomed from fellow board members.


Cheers
JEast

JEast I think Mr. Market has and will provide you with all the feedback you need. Thanks again for the idea, and thanks for the full white paper. I know I will learn something.

Regards.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 06, 2011, 12:09:43 PM
Thanks JEast for the  original analysis on SSW.
I  had moved money from an IRA in mutual fund to a brokerage acct. and was in the process of adding to my
position in SSW in the 12's, filled about a 1/3 of what I wanted , then the WFC upgrade pushed it higher
so my dilemma is, do I chase it here , still $.55 dollar from my original cash flow IV, or wait for a pullback
 in SSW and/or the market.  Losing out on a 10% move bugs me , but think I should grin and bear it

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 06, 2011, 12:56:11 PM
I wasn't aware that WFC had upgraded it?  Any details you could share.

Gaf, Why not add half of what you intended and see if it retrenches.  We are probably due for a few down days in the market to bring everyone back to Earth soon.  Who knows. 
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 06, 2011, 12:59:34 PM
Never mind, I found it:
Wells Fargo (WFC) is upgrading Seaspan Corporation (NYSE: SSW) to Outperform.

We are upgrading SSW to Outperform as we believe SSW remains best of breed' within the containership sector and we expect fundamentals across the containerized freight complex to remain firm in 2011, Wells Fargo writes.

After pulling back 11% since late October (versus the S&P, up 7%), SSW is now yielding 3.8%, which we view as solid compensation for owning through 2011 into 2012, at which point we expect material dividend upside potential. We believe SSW's dividend could more than double in 2012 (from $0.50/share), as it fulfills its orderbook commitments and starts returning value to shareholders. Our valuation range goes to $16-17 from $15-16.

Seaspan Corporation closed Tuesday at $13.02.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on January 06, 2011, 01:16:24 PM
As this post is now in the idea section, and I was the originator - I suppose that the full disclosure be presented.  As such, attached is the original white paper.  Though a little dated at this juncture, I am of the belief that much of the thesis is still intact even at current prices.

Feedback and critic is always welcomed from fellow board members.


Cheers
JEast

I thank you very much for the gift horse, and I hate to look it in the mouth, but I didn't understand the reasoning behind the counter-party risk.  Somebody could always tear up the lease after the ship has been unloaded, or can tear up the lease on the new-builds that are not yet delivered.   Anyhow, an academic point that isn't terribly important the way things have worked out (so far).  Or maybe I didn't understand the maritime laws governing non-payment -- is it on a per-ship basis only (allowing them to break lease after ship is unloaded) or can you seize any cargo from any of the ships (making it difficult to coordinate their ships all being unloaded at the time of lease being broken)?

Incidentally, my grandfather's grandfather (my great-great-grandfather I think) had all of his ships (about 13 I believe) sunk in the Crimean War.  Family legend has it that he was (in his late 20s or early 30s I think) on his way to being a shipping tycoon.  I think I have better luck but we'll see.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 06, 2011, 02:46:12 PM
James, I was just going back in my records.  I started my position in December 2008.  I wish we had the old board.  I am pretty sure you posted this on the old board as an idea way ahead of your white paper.  I know I had looked at it due to Irwin Michael holding it for a long period of time before then. 

Anyway, its good to look back at old assumptions.  The projected huge share dilution was minimal.  The dividend was dramatically reduced but I think we knew that was coming.  We didn't know during the credit crisis what would happen but they appear to have weathered it extremely well.  I wont be selling this one before 25 US is reached, if ever.  The dividend is going to go up as they get the remaining ships on lease.
Title: Re: ATCO - Atlas Corp
Post by: ericd1 on January 06, 2011, 03:26:35 PM
James,

Great effort on your part...Thanks for sharing your in depth analysis!

I hope SSW goes thru the roof...

Eric
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 06, 2011, 04:50:23 PM
James, I was just going back in my records.  I started my position in December 2008.  I wish we had the old board.  I am pretty sure you posted this on the old board as an idea way ahead of your white paper.  I know I had looked at it due to Irwin Michael holding it for a long period of time before then. 

Anyway, its good to look back at old assumptions.  The projected huge share dilution was minimal.  The dividend was dramatically reduced but I think we knew that was coming.  We didn't know during the credit crisis what would happen but they appear to have weathered it extremely well.  I wont be selling this one before 25 US is reached, if ever.  The dividend is going to go up as they get the remaining ships on lease.

Hey Al,
You can go back and have a look. JEast was 653211 back then (Correct?)... Anyway, you can google your boardname as well as the company and get the old posts.

Take a look at this link for our discussions around SSW in the "fall" of 2008, for example...

http://brk.visualhash.com/search/index.cgi?query_string=SSW&query_type=any (http://brk.visualhash.com/search/index.cgi?query_string=SSW&query_type=any)

Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 06, 2011, 06:37:03 PM
Uccmal, left the house just after I posted, and you found more info than I had anyway,
As you say Who Knows!! what will happen to market and stock , and I dont want to be out of SSW when the 13000 teu ships come in, and they start raising the div to old levels
As to dilution,  unless they sell more stock to finance additional ships, final share count looks to be in low 90 millions, way below earlier projections
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 07, 2011, 03:56:39 AM
Well <IV... good to know all our comments, the good, the bad, and the ugly are immortalized..... :-\

Thanks, At least on this one we seem remarkably consistent.  My original buy prices were in the range from 5 to 9.  Since then I have churned it a little and the ACB is now just below $12.00.  The dividend has paid the interest.  What more could one ask for?
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on January 10, 2011, 05:55:17 AM
Thanks again JEast for the white paper. I really like your call option strategy for minimizing risks. I hope to use it in the future, just have to work to keep the positions properly sized. I tend to go a bit overboard.
Title: Re: ATCO - Atlas Corp
Post by: SmallCap on January 10, 2011, 08:36:23 AM
Is any significant portion of Seaspans debts on a variable rate or subject to rate increases?

I was wondering if a rising interest rate environment would be a problem because of the long term contracts that they have in place?
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 10, 2011, 10:56:59 AM
Smallcap, off the top of my head from past reading,  they do have variable rate loans tied to Libor, and they have purchased interest rate
swaps to maintain their interest rate around 6%.  The interest cost does vary with the movement of Libor but is but is held within a range by the swaps. 
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 10, 2011, 11:59:56 AM
Smallcap, off the top of my head from past reading,  they do have variable rate loans tied to Libor, and they have purchased interest rate
swaps to maintain their interest rate around 6%.  The interest cost does vary with the movement of Libor but is but is held within a range by the swaps. 

This is correct. SSW is the fixed payer on the SWAP's. That's good news for SSW if variable rates rise as far as the existing debt goes.
Title: Re: ATCO - Atlas Corp
Post by: SmallCap on January 11, 2011, 06:05:40 AM
Will any of their debt need to be refinanced (at potentially higher rates) before the matching leases expire?

Because they have a fixed income and a lot of debt I am trying to gauge their interest rate risks.

Also has anyone looked at how long it would take for them to get out of Debt? This would be on a theoretical basis only because I don't expect it to ever happen but was wondering with their current payment schedule when would they pay off all the debt? This would be kind of like a run off scenario. How much life would there be left in their ships after they had paid off all the debts?

SmallCap
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 11, 2011, 09:03:01 PM
Will any of their debt need to be refinanced (at potentially higher rates) before the matching leases expire?

Because they have a fixed income and a lot of debt I am trying to gauge their interest rate risks.

Also has anyone looked at how long it would take for them to get out of Debt? This would be on a theoretical basis only because I don't expect it to ever happen but was wondering with their current payment schedule when would they pay off all the debt? This would be kind of like a run off scenario. How much life would there be left in their ships after they had paid off all the debts?

SmallCap

Page 75: Time Charters
Page 154: Note 7 Discusses Debt
Hammer Away!

http://files.shareholder.com/downloads/SSW/1125574973x0x360411/0fbc0b8d-2b07-4145-8518-099da4fb6ab0/Seaspan.pdf

Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 20, 2011, 09:01:44 AM
HONG KONG, CHINA--(Marketwire - 01/19/11) - Seaspan Corporation (NYSE:SSW - News) ("Seaspan") today announced that it plans to offer shares of its Series C Cumulative Redeemable Perpetual Preferred Stock (the "Series C Preferred Shares") in a public offering.

Seaspan intends to use the net proceeds from the offering for general corporate purposes, which may include making vessel acquisitions or investments. Following the offering, Seaspan intends to file an application to list the Series C Preferred Shares on the New York Stock Exchange.
No info as to amount , interest, or for what reason, hopefully they have found some deals out there
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 21, 2011, 01:21:35 PM
SEC filing info on the new C series pfd.  Exp. money, 23.5 mil/yr. in addtional interest expense



Seaspan Corporation
9.50% Series C Cumulative Redeemable Perpetual Preferred Shares
(Total Issue Size: 10,000,000 Shares)
FINAL TERM SHEET
Dated January 21, 2011
 
Issuer:          Seaspan Corporation
Title of Securities:          9.50% Series C Cumulative Redeemable Perpetual Preferred Shares, par value $0.01 per share, liquidation preference $25.00 per share (the “Series C Preferred Shares”)
Trade Date:          January 21, 2011
Settlement Date:          January 28, 2011 (DTC)
Offering Size:          10,000,000 Series C Preferred Shares ($250,000,000 aggregate liquidation preference)
Maturity:          Perpetual
Conversion; Exchange and
Preemptive Rights:
      Will not have any conversion or exchange rights or be subject or entitled to preemptive rights.
Dividend Payment Dates:          Quarterly on January 30, April 30, July 30 and October 30, commencing April 30, 2011 (each, a “Dividend Payment Date”)
Dividends:          Shall accrue and be cumulative from the date the Series C Preferred Shares are originally issued and shall be payable on each Dividend Payment Date, when, as and if declared by the Issuer’s board of directors.
Dividend Rate:          9.50% per annum per $25.00 of liquidation preference per share (equal to $2.375 per share per annum), subject to increase upon (i) a Covenant Default, (ii) a Cross Default, (iii) a Dividend Payment Default or (iv) a Failure to Redeem (each as defined in the preliminary prospectus), in which case the dividend rate payable on the Series C Preferred Shares shall increase (subject to an aggregate maximum rate per annum of 25% prior to January 30, 2016 and 30% thereafter), to a rate that is 1.25 times the dividend rate payable on the Series C Preferred Shares as of the close of business on the day immediately preceding the Covenant Default, Cross Default, Divided Payment Default or Failure to Redeem, as applicable, and on each subsequent Dividend Payment Date, the dividend rate payable shall increase to a rate that is 1.25 times the dividend rate payable on the Series C Preferred Shares as in effect as of the close of business on the day immediately preceding such Dividend Payment Date, until the Covenant Default, Cross Default or Dividend Payment Default is cured or the Series C Preferred Shares are no longer outstanding.
Optional Redemption:          At the option of the Issuer anytime on or after January 30, 2016, in whole or in part, at a redemption price of $25.00 per share plus an amount equal to all accumulated and unpaid dividends thereon to the date of redemption. A failure to redeem all the Series C Preferred Shares on or prior to January 30, 2017 shall constitute a Failure to Redeem.
Issue Price:          $25.00 per share
Day Count:          30/360
Net Proceeds to the Issuer
(before expenses):
      $241,250,000
Sole Book-Running Manager
and Structuring Agent
      Merrill Lynch, Pierce, Fenner & Smith Incorporated
Co-Managers          Citigroup Global Markets Inc.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 21, 2011, 01:23:05 PM
That's 23.75 mil/yr.
Title: Re: ATCO - Atlas Corp
Post by: ericd1 on January 21, 2011, 03:43:37 PM
Depending on where they settle, 9.5% interest would work well in my pfd basket.. :)
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on February 17, 2011, 10:45:21 AM
SSW is in discussion to buy up to 10 more ships in the 10,000 range, nothing committed yet.  
A possible use for the recent pfd. shares offering, been waiting for some info on their plans
Cost of these ships could be 1.25 to 1.5 billion( 13000 teu's were 165 mil)
Financing should be interesting, hopefully the dividend raises wont be postponed

Item 1  –  Information Contained in this Form 6-K Report
Seaspan Corporation (“Seaspan”) is in discussions with several selected Chinese and Korean shipyards regarding the potential acquisition of up to ten new ships of about 10,000 TEU capacity each, for delivery in 2013 and 2014, subject to agreement on a purchase price and other terms acceptable to Seaspan. These ships would have an innovative design that focuses on improving loadability and fuel efficiency. A letter of intent has not been signed between the parties and there is no assurance that Seaspan will enter into a letter of intent or complete the transaction.
Forward-Looking Statements
The statements in this release that are not historical facts may be forward-looking statements, including statements regarding the possible acquisition by Seaspan of additional vessels. These forward-looking statements involve risks and uncertainties that could cause the outcome to be materially different. These risks and uncertainties include, among others: an inability to agree to terms with the shipbuilder and to enter into definitive documents; financing of the transaction; and those risks discussed in Seaspan’s public filings with the SEC. Seaspan undertakes no obligation to revise or update any forward-looking statements unless required to do so under the securities laws.
 
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 08, 2011, 04:00:32 AM
uhuru,
btw - Uccmal, do you really think SSW will increase the dividend when they still appear hell bent on acquiring yet more ships? I'm curious, the thought hadn't crossed my mind

These guys are pretty cautious around financing and I am thinking they will use cash flow.  I cant imagine the Washington Family is that keen on investing another 200 M at this point - they probably borrowed the money against other assets.  With each ship on long term lease the cash flow/new capex ratio increases. 

I wish they wouldn't buy the new ships and concentrate on raising cash and the dividend but am thinking they will do both.  The managers seem very astute after watching them for 2 1/2 years.  As we know the managers are highly motivated to get the dividend above the magic number - I think it was 1.76 -
Title: Re: ATCO - Atlas Corp
Post by: finetrader on March 08, 2011, 05:48:13 AM
Would they acquire 10 new 10000 TEU ships, I think it just fit into the capital structure of the company.
check this article: http://www.eshiptrading.com/InfoContent-41574-4.html

The busines model is to finance ships with 34% equity,66% debt

These 10 new ships would cost around 1B$, so you need 334M$ cash from operation to finance it.
Starting 2012, they should generate 300M$ cash flow. Would they increase the dividend to 2$/share (which is more than expected), it represents about 140M$ annually. So 160M$ per year is free to reinvest in the business.
Let say it takes two years to build those 10 new ships(2012 and 2013)... you have 320M$ available for it.

Play with the numbers as you want, but what I see is that 334M$ can be found while increasing the dividend significantly.
Title: Re: ATCO - Atlas Corp
Post by: finetrader on March 08, 2011, 03:30:47 PM
Concerning scrap value,

here an article:
http://www.eshiptrading.com/InfoContent-41793-4.html
Title: Re: ATCO - Atlas Corp
Post by: Ross812 on March 11, 2011, 06:39:37 AM
Is this getting hit by the Tsunami today?
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on March 11, 2011, 07:13:08 AM
Is this getting hit by the Tsunami today?
earning announcement on Monday.  Someone knows something that we don't?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 14, 2011, 07:58:01 AM
Seaspan delivering Q after Q.  Raising dividend to 0.75 per year.  55 ships in operation and contracted now.  Deal with Carlyle, Washingtons, Wang, and SSW to finance 1 B of ships.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=556457

Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 14, 2011, 12:19:10 PM
I guess you cant win em all. I almost bought back in when it was down a point. Kinda kicking myself for going to lunch without putting in a bid.

Congrats guys.
Title: Re: ATCO - Atlas Corp
Post by: finetrader on March 14, 2011, 02:15:15 PM
here's the transcript:

http://seekingalpha.com/article/258161-seaspan-ceo-discusses-q4-2010-results-earnings-call-transcript
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 21, 2011, 12:52:30 PM
I was gone for a few weeks and without  internet access, and came back to good news from SSW. 
In reading the conference call there was a reference to SSW acquiring the management co. , anyone have any info on that?
The JV deal looks good for SSW, allowing economies of scale and (if they bring mang. in) will increase rev. since they will manage the ships
in the JV. 
The "progressive" div. policy that they speak of will increase our divs while leaving  cash flow for growth tho it looks like it will be awhile til they get back to $2

Their share count is at 84.5 including A pfd's at end of 2010, and at conversion should be around 91/92 mil.- is this # close to reality??
 Finetrader , I agree that they will have available cash flow for growth , and if share #'s correct and div. is 1.25 to 1.5 at 2012 end SSW will have from 162 mil to 185 mil per yr. to put toward the new ships
Title: Re: ATCO - Atlas Corp
Post by: finetrader on March 21, 2011, 01:05:08 PM
yeah my share count didn't take into consideration the dilution from Series A preferred shares conversion to common.

So your numbers are more appropriate.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 25, 2011, 07:00:03 AM
Deutsch Bank just put a buy on SSW shares with a target of 27.  Last week someone,  I think Raymond James moved their target to 20 from something lower.  I am thinking more in terms of the low 40s now if they keep incrementing the dividend.
Title: Re: ATCO - Atlas Corp
Post by: finetrader on March 25, 2011, 08:29:31 AM
I have just hedged this position by shorting SPY.

SSW is 20% my portfolio and the two biggest risk i see are economic slowdown and additionnal vessels supply.

By having a young fleet and long term fixed rate contract I feel protected for additionnal supply in 2011.
And now with the SPY position, I feel like I have all the upside potential for SSW with limited downside risk.

I've been thinking a long time about 'hedging' or 'risk control' and believe with S&P500 above 1300 and all the 'speculation' going on by central banks this is an appropriate time to do it. So in other word, 20% of my portfolio is 'hedged'.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 25, 2011, 08:57:47 AM
Yawn!

Chop wood, carry water.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 25, 2011, 09:09:29 AM
Yawn!

Chop wood, carry water.
LOL
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 25, 2011, 09:49:15 AM
Yawn!

Chop wood, carry water.
LOL

Nice when things go your way, eh?
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 25, 2011, 09:55:19 AM
Im slightly annoyed Nov Options came out Yesterday or the day before and my bid for a decent chunk of them never got filled. I kinda want a pullback but I guess thats a bit silly.

Do you really think it will trade down to a 5% yield. That would be nuts.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 25, 2011, 01:29:00 PM
Quote from: lessthaniv on Today at 07:57:47 AM
Yawn!

Chop wood, carry water.
LOL

Nice when things go your way, eh?

Very Nice indeed
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on March 25, 2011, 02:33:00 PM
I think the chances are pretty slim that we'll see this trading at $15 or less any time in the near future (no guarantees), but I wouldn't be surprised if what you buy today translates into 5% yield in pretty short order (still no guarantees!).

The story of SSW's stock price is interesting.  I've been around this company for a long time and I have been following it very closely.  It now makes up a majority of my portfolio (I'm big on concentration - after thorough analysis) and I'm happy to see it coming up in price again.

SSW used to trade at about 6-8% yield consistently.  At the time, management's philosophy on financing was pretty simple: place orders, raise debt and execute long-term contracts simultaneously.  Issue new shares to raise equity as needed.  This model was effective for the first few years and indeed brought early investors considerable wealth in the form of $1.80-$1.96/year in dividends.  Management and the board used the dividend to prop up the stock price, allowing them to issue more stock at non-dilutive prices, creating a reliable source of equity financing.

When the World Collapsed, so did this model.  Equity raises became incredibly expensive in terms of dilution.  When the final "classic model" dividend was paid out, SSW was yielding an incredible 18%.  Clearly the market was not rewarding this model any longer and future equity raises would be highly dilutive.  SSW's management had to scramble in order to correct the situation.

Fast forward 2 years, and we're looking at a company that has now raised equity / lowered debt through a number of different transaction types: convertible preferred shares, sale-leasebacks, callable preferred placements and issues, and retained earnings.  The entire equity gap that was outstanding before the crisis has now been filled in a reasonably non-dilutive fashion.  Management loves to talk about financial flexibility on the quarterly earnings calls, and recently Sai Chu (CFO) went on to comment specifically on their lessons learned regarding equity risk.

The reason why I bring up this history is 1) to establish credibility as this is my first post on this forum, and 2) to emphasize the lengths to which management went in order to follow through with their plans while limiting the intrinsic value (as opposed to market value) cost to shareholders.

When you compare SSW today to SSW from 2 years ago, the fundamentals are exactly the same, except for the financing bit.  Management now clearly prefers a balanced and opportunistic approach to financing future growth.

So, what does this have to do with a 5% yield?  Well, I think the days of high-yielding SSW (common) shares are gone for good.  The market will no longer discount SSW based on impending equity offerings.  Combine that with Seaspan's improved position relative to its competitors, suppliers, and customers over the past two years, the recovering containerized shipping industry, and promising growth prospects - these are some of the reasons why I am convinced that this investment will continue to outperform until further notice.

I also think that the progressive dividend model is a signal that we won't see a rapid return to a $2/year dividend.  Instead, I expect that we will see the dividend raised in line with the number of new vessels that come on board in the previous quarter or two (and the share price will follow along with that).
 
I originally invested in SSW for its dividend yield.  I have since invested, and continue to invest today based on potential capital gains.

- VAL9000
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on March 25, 2011, 07:03:25 PM
Pardon me, would you have any SSW?  But of course.

http://www.youtube.com/watch?v=NmannAYiwh0
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 25, 2011, 07:15:32 PM

The reason why I bring up this history is 1) to establish credibility as this is my first post on this forum

That you have done.
I look forward to your post count going up. In the mean time I will have to quite anchoring. It looks like we have dividend raises throughout the year and new ships coming online.
In my analysis I assumed that SSW would hobble along with a 10% yield  basically moving up as the dividend was raised. Your analysis makes more sense  ;D
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on March 26, 2011, 07:40:05 AM
Thanks Myth, I appreciate the encouraging words.  I've been lurking on this forum for a while and I'm looking forward to contributing.

I think we're still going to see a bit of hobbling along in terms of tracking the dividend, but 10% seems phenomenally cheap to me.  I'm guessing we'll track at 3.5-5%.  But, to guess at how quick we'll be hobbling, take a look at the slide deck from SSW's last conference presentation, pages 7 and 8:
http://ir.seaspancorp.com/eventdetail.cfm?eventid=93850

CAGR for DCF over the 8 years from '05 to '13 is/was/will be 35%. So, if the price tracks the dividend, and the dividend tracks DCF going forward, then we should see some pretty quick hobbling.  Just looking at DCF ignores some pretty important stuff that Eric has brought up previously, namely the ability to roll the debt and net effect of ship scrapping, but it's a decent proxy for growth of the divvy going forward if you blunt it to, say, 20%.

I think Gaf is right on the money with the value of the JV to SSW.  The Carlyle deal sets up the next phase of growth for this company and presents yet another method by which SSW can obtain equity.  They might even lower their debt : equity ratio which I know would further please Eric (me, I'm not so concerned).  The next 20-30 ships will likely flow through this new structure, and I'll bet long odds that you will see more of the same: long term contracts, phased in/stable delivery cycle, and a CAGR for fleet growth and DCF of somewhere between 25% and 35% over the next 3-5 years starting in late 2012.  In addition, the profitability of these vessels could be comparatively higher given SSW's increased clout in the market.

And in reply to Gaf's question about the acquisition of the Manager, I haven't heard anything yet, but I think there's another incentive for this restructuring of the business relationship that hasn't been touched upon.  The Manager owns a special set of shares that were an incentive for optimizing the "classic model" approach.   These special shares pay out a kicker to the Manager based on growth of the dividend.  The kicker is 10% - 25% of the total dividend paid out to all shareholders, but it doesn't kick in until the quarterly dividend is $.485 or higher.  We're talking about $14mm - $70mm in annual incentives for $.485 - $1.00 / q dividend.  Incentives that, based on the new progressive dividend policy, are effectively going away for a number of years.  Oh, and the manager is actually who employs Gerry Wang, and it's indirectly owned by Gerry, Graham Porter (one of the Tiger guys), and the Washington family.  Soo, it's a bit incestuous but the main thing is that it's probably going away now that the model is changing and this group has identified a new/better way to make money.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on March 26, 2011, 01:42:45 PM
I would have preferred the full dividend with no growth in new ships.  However, that's because I had a 50% position (of my net worth) at the time I initially bitched about the prospect of new ships instead of the full dividend.  I figured I would be much better off at the implied discount that I was buying the current ship fleet at ($11 per share), and then having the full dividend repaying me (so I have cash flow to diversify into new things).  And I had 60% of my SSW in RothIRA accounts. 

Heck, that's the way to go if you are a small shareholder and want to optimize wealth.  But the company strategy of course that they've taken benefits the bigger boys primarily (like the Washington family) who already own so much that they can't materially (double for example) their position.

Then the MBI opportunity finally gelled in my head so I sold some of the SSW (only in RothIRA) at $15.75-$17.70 and today SSW is still 33% of my net worth.  I won't be selling more until the fat lady sings (roughly $24 per share unless I'm selling to go into perceived-better-value things).

The upside of the lower dividend policy is that most of my SSW is now in my taxable account.  Come end of July, all of the shares will be long-term so a trip to $24 by end of this year will make me very happy.

The reason why I'm happy at $24 is that at that point I don't think there will be much further tremendous upside compared to what else is likely out there at the time -- something always seems to come along.  I don't want to wait a long time to squeeze the last few drops out of the lemon. 

I also don't think it should trade at IV.  IV is not fair price.  You can boost IV just by adding more leverage -- fair price should be some risk adjusted number (well below IV in the cash of a highly levered operation).  I figure the return they get when adding new ships is probably equivalent to buying the existing fleet of ships (including newbuilds to be delivered) at about $18 per share -- so it is worth more than that for the convenience of being a passive investor, but how much more?
Title: Re: ATCO - Atlas Corp
Post by: biaggio on March 26, 2011, 05:54:56 PM
" I had a 50% position (of my net worth) at the time"

Ericopoly, I admire your courage.

Any anxiety at all or lost any sleep?

Was it your plan from the beginning to have a 50% position or did it evolve due the low valuation

I hope I can have that kind of conviction some day.


Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on March 26, 2011, 07:36:15 PM
" I had a 50% position (of my net worth) at the time"

Ericopoly, I admire your courage.

Any anxiety at all or lost any sleep?

Was it your plan from the beginning to have a 50% position or did it evolve due the low valuation

I hope I can have that kind of conviction some day.


I just think it's a form of ignorance -- like, I don't fully understand the risks so therefore I'm not scared away.

But here is what worried me about the company, and the second point is what still worries me about it as a long term hold (although not in the near term):  
1)  Wang is a deal maker.  He isn't going to endure years of doing nothing while patiently de-leveraging.  I think that's the real reason behind the new partnership (or at least it might be what got the discussion started).  They've levered SSW so high there just isn't enough money left for him to swing big and regularly recurring deals with.
2)  Not sure about the lifetime of these ships.  Historically oil has been cheap.  Long term, dramatically higher oil (if that happens) will lead to huge efficiency innovations in ship design.  That would render the legacy fleet obsolete, perhaps a decade early?  Fuel is after all the highest cost in shipping.  Short term oil being high means slow steaming and need for new ships.  But in 15 years will there be a demand for these fuel guzzlers?
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on March 27, 2011, 08:34:55 AM
But yes, it evolved due to low valuation.  Was 20% initially -- a good deal of which I'd bought a bit over $12.  Then in July it went to $10+ change and I bought more, then under $10 I bought more.  Average cost comes to $11.

I should really have more of a process but I don't -- I react emotionally when stocks drop.  But I get a greed reaction, so I tend to overdo it.  Then I whip out the calculators and figure out how much I'll make when SSW restores their full dividend -- then I get anchored to that level of expected dividend and don't want to sell any shares.  Now that the stock has rallied somewhat, I then lose much of my emotional argument for buying in the first place so I get an urge to sell some.

I tend to load up on seemingly obvious winners because I lack the ability to understand the more complex ones?  Once the discussion turns to inventory turnover and all kinds of MBA metrics I glaze over and I'm lost.  I understood the logic behind FUR, SSW, FFH, C, BAC, and I tend to believe I understand MBI. 

Very simplistic, which is why I'm willing to concede that it may just be relative ignorance and psychological faults that are the real cause here.  One of the investors that come to mind is Forrest Gump -- the guy just plowed all of his money into an fruit company and held on until he was ridiculously wealthy.  Most people are scared by tech stocks, but not him.  His advantage is that he didn't realize it was a tech startup.  I don't think I'm quite as bad as him, but it's shades of grey.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 27, 2011, 09:04:30 AM
But yes, it evolved due to low valuation.  Was 20% initially -- a good deal of which I'd bought a bit over $12.  Then in July it went to $10+ change and I bought more, then under $10 I bought more.  Average cost comes to $11.

I should really have more of a process but I don't -- I react emotionally when stocks drop.  But I get a greed reaction, so I tend to overdo it.  Then I whip out the calculators and figure out how much I'll make when SSW restores their full dividend -- then I get anchored to that level of expected dividend and don't want to sell any shares.  Now that the stock has rallied somewhat, I then lose much of my emotional argument for buying in the first place so I get an urge to sell some.

I tend to load up on seemingly obvious winners because I lack the ability to understand the more complex ones?  Once the discussion turns to inventory turnover and all kinds of MBA metrics I glaze over and I'm lost.  I understood the logic behind FUR, SSW, FFH, C, BAC, and I tend to believe I understand MBI.  

Very simplistic, which is why I'm willing to concede that it may just be relative ignorance and psychological faults that are the real cause here.  One of the investors that come to mind is Forrest Gump -- the guy just plowed all of his money into an fruit company and held on until he was ridiculously wealthy.  Most people are scared by tech stocks, but not him.  His advantage is that he didn't realize it was a tech startup.  I don't think I'm quite as bad as him, but it's shades of grey.

Hey man dont change whats worked, and if it aint broke dont fix it. If you were a 2 - 5% in terms of positioning size, I would guess you would be a 9-5er. Just make sure you have enough capital on the side would be my take away.

Also this quote made me think of your process, its something I will have to keep in mind - The market does 95% of the work for you - your problem is not to duplicate research but to identify errors of logic in company evaluations.


I just listened to the call, and you are right. Wang is a deal maker. I doubt this recover, and honestly doubt China's ability to retain their dominance. I think at some point they may be overexposed but what do I know. Also everyone tends to order ships at the same time. Containerships may end up like dry bulks or oil tankers if everyone gets excited. With that said and the new dividend policy I do think you guys are right. I may have to up my bid.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on March 27, 2011, 09:45:52 AM
Well I saw one of the interviews where Wang was talking about China and how it's growing and people are optimistic and etc...  Then I think about the amount of ships they ordered in 2007...  It's funny because the Washington family is already beyond ridiculously rich... what's up with all the risk for the extra couple of percentage points of compounding?  They could be unlevered and just sail into the sunset.  But that's the problem with me as well.... sailing into the sunset is boring.  These guys just seem to seek maximum excitement.  Maybe it takes one to know one.

They've offset their aggression with long-term contracts, strong counter-parties, interest rate hedges, and whatnot.  So they probably feel like the race car has a nice roll cage and thus they won't get hurt.  And it's true that race cars with roll cages are much safer... but just driving the car slower has it's benefits too.

So I just want to be paid for the risk.  At these prices at least the stock is still priced at roughly (for the cost of buying the existing fleet per share) the same as where fresh money buys a new ship.  But once the stock is like up to the mid-20s then you are holding at a cash flow yield that is much lower than where the market is pricing new ships in the current rate environment (ships become overvalued on a per-share basis).  So I don't think the risk-adjusted metric at that point is anywhere near as good.  However it will be interesting when they trade at a premium because they will likely issue shares to raise capital at this lower cash flow yield per share and then reinvest the money into yet more ships... taking advantage of the cash flow yield delta -- but that delta only exists if the new ships ordered are similarly leveraged (the max).  But look, there's just no way I'd have anywhere near this much SSW at those prices.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 27, 2011, 10:07:10 AM
They have a good model but have only dealt with renters not wanting to pay, what happens when ship renters cant pay is one thing the business model hasnt taken into account.

Like you said, at that point I will be long gone so it wont matter much.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on March 27, 2011, 10:12:34 AM
Their race car carried a couple of airbags (wholly owned ships) -- but from what I can tell they've already blown out the airbags in the sale-leaseback transactions and seem to be disinterested in having them replaced for the next crash.  They may still prove my worries unfounded on this point, so it's too early to say.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 27, 2011, 10:23:26 AM
I always have Margin of Safety in mind.  

If China blows up badly, which is a very real possibility what will happen with SSW - as you said Myth renters may decide or may not be able to pay at all.  I dont know anything about Chinese bankruptcy law as applies to entities that are partially or wholly government owned.

That we are heading to an oversupply fo containerships seems like a real possiblity.  I think this explains part of the stock pop this past two weeks.  JV will be taking the newest risk and be down the quality ladder as far as customers, at least at first.

Eric, your psychological analysis is spot on as far as i can tell.  They are all dealmakers.  However, once long term leases are in place, ships built, and a long term operating regimen is in place, it is not inconceivable that Wang leaves SSW and has his management company run things mostly without him there.  

Finally, I hold about a 10% position in SSW - 4th largest.  As per any company I hold, I will sell when other opportunities begin to look better, or if it starts to look worse.  For now, it has lots of mileage left.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 30, 2011, 08:01:17 AM
The Street.Com jumps on the bandwagon today,

http://www.thestreet.com/_yahoo/story/11065006/1/7-companies-to-post-big-profit-gains.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Thinking of pulling some SSW off the table and wait for pull back in this market
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 30, 2011, 08:09:35 AM
The Street.Com jumps on the bandwagon today,

http://www.thestreet.com/_yahoo/story/11065006/1/7-companies-to-post-big-profit-gains.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Thinking of pulling some SSW off the table and wait for pull back in this market

I just got back in with Nov calls. I paid much more then I would have prior to the run. Now have to figure out how to get back into pulp. Basically with SSW I took my stock gains from SSW common and put it in calls. Raised cash and have a similar interest.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on March 30, 2011, 10:44:30 AM
They have a good model but have only dealt with renters not wanting to pay, what happens when ship renters cant pay is one thing the business model hasnt taken into account.

Like you said, at that point I will be long gone so it wont matter much.

Myth,
Their "renters" are for the most part publicly traded entities. You go have a look at their financials anytime to ascertain their balance sheet strength. That one of the things that gave me confidence when very few people thought they would see the other side of the credit squeeze.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on March 30, 2011, 11:43:39 AM
IV, I think you're right overall about their charterers being financially sound, but I think you are mistaken with respect to their being public companies.  I believe that only Maersk, K-Line and MOL are public entities and they represent a relatively small fraction of the charter revenue stream.  A majority of Seaspan's charterers are private companies or state-owned businesses such as Cosco and CSCL.  As a comfort, these companies as a group (excepting CSAV) appear to have avoided many of the financing issues that plagued other shipping lines over the past couple of years (CGA CGM comes to mind as an example of a shipping line that was teetering on the brink).

A while back, Gerry used to make it a point to mention that Seaspan only deals with the highest quality counterparties in their chartering activities.  How much of this is lip service and how much is actual fact, we can never really know.  I do think that it's worthwhile to note that only CSAV and Hapag-Lloyd ever reached out to SSW during the recent recession to discuss renegotiating charter rates.  HL seemed to be fairly passive about their request.  CSAV was in a more concerning situation but SSW refused this request and has not reported any problems with CSAV since.

I have read recently that CSAV and Hapag-Lloyd are both currently evaluating IPOs.  This should help us in evaluating counterparty risk going forward.

Another thing I'd like to add is that we're not dealing with just China when we think of Seaspan.  A majority of these vessels are chartered to Chinese liners, but they are not bound to Chinese imports and exports.  A basic example is from Seaspan's Operating Fleet page.  The first vessel there is contracted to CSCL, but was renamed the CSAV Licanten.  Strange, right?  The story is that this vessel was rechartered by CSAV from CSCL.  We're looking at what we could call a "Chinese asset" that's earning 100% of its economic value via trade routes linking South America with North America.

The demand for these assets isn't inextricably tied to America's demand for Chinese goods or China's growth engine.  Because they are ships, they can be redeployed wherever the current demand-supply differential is greatest, which won't always be the US-China trade route.  The real demand driver here is the international market for containerized trade.  And if you really want to get enthusiastic about this company, consider the network effect of international trade, i.e. when a country becomes politically stable and economically reliable and installs a container trading port, how much additional trade will occur within the network.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on March 30, 2011, 01:11:34 PM
VAL9000 you bring up good points. My issue is some of the smartest guys out say more to come on the world wide recovery and people tend to get excited and overbuild on ships, rigs, and other big heavy capital intensive things. Similar growth arguments were made in dry bulks and crude tankers.

Its always different reasons but the same outcome oversupply. We got lucky with slow steaming inmo.

Either way these are long term issues. Thanks for the kick in the ass needed to get me back in. I am just enjoying the ride now for now.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 31, 2011, 01:40:47 PM
SEASPAN CORPORATION
(Exact name of Registrant as specified in its charter)
 
 
 
Republic of The Marshall Islands         Not Applicable
(State or other jurisdiction of
incorporation or organization)
    
(I.R.S. Employer
Identification No.)
Seaspan Corporation
Unit 2, 7th Floor
Bupa Centre
141 Connaught Road West
Hong Kong
China
Telephone: (852) 2540-1686
(Address of principal executive offices, including zip code)
 
 
Executive Employment Agreement between Seaspan Corporation and Gerry Wang
dated as of March 14, 2011
Transaction Services Agreement between Seaspan Corporation and Gerry Wang
dated as of March 14, 2011
(Full title of the plans)
 
 

 
Copies to:
Perkins Coie LLP
David S. Matheson
Danielle Benderly
1120 N.W. Couch Street, 10 th Floor
Portland, Oregon 97209
Telephone: (503) 727-2000
 
 

CALCULATION OF REGISTRATION FEE
 
Title of Securities
to Be Registered
    
Number to Be
Registered(1)
     Proposed Maximum 
Offering Price          Proposed Maximum   
Aggregate Offering Price           Amount of
Registration Fee(3)
Class A Common Shares, par value $0.01 per share

     3,000,000         $17.535(2)         $52,605,000 (2)         $6,107.44
Total

     3,000,000                   $52,605,000         $6,107.44
 
 
(1)    Includes an indeterminate number of additional shares which may be necessary to adjust the number of shares reserved for issuance pursuant to such employee benefit plan as the result of any future stock split, stock dividend or similar adjustment of the Registrant’s outstanding Common Stock

SSW has just issued another 3 mil shs.  Puts the fully diluted share count up to 95 mil now.
Cant tell from this reg. if this is dealing with Wang's new employment(see reference above to his contract) or if they are building cash for
new builds, either way it seems to me the div. expansion is going to be a long drawn out affair. 
  Even with this dilution there will over $3/ sh of dist. cash
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 31, 2011, 08:16:47 PM
In reading the sec filing from SSW , at first it looked like they are issuing shares, however in reading the 20-f it appears that this filing was
a registration of shares for Wang that are or will be part of his new employment agreement:

"In March 2011, in connection with our investment in the Vehicle, we entered into a new employment agreement with Gerry Wang, pursuant to which we agreed to register the shares Mr. Wang earns as a performance bonus or as transaction fees on a Form S-8 registration statement filed with the SEC. Please read “—Employment Agreement and Other Related Agreements with Gerry Wang” for more information."

Can anyone shed more light/ decipher this filing, and why the price if part of registration only(tax basis for Wang??)

Thanks , GAF

Title: Re: ATCO - Atlas Corp
Post by: Myth465 on April 01, 2011, 06:40:35 AM
VAL you are a pretty good market timer, thanks for the tip. Been very profitable over the last 5 days.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on April 01, 2011, 09:27:50 AM
Myth, YOU are a pretty good market timer, I've been sitting on SSW for ages :)
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on April 01, 2011, 05:01:14 PM
Can anyone shed more light/ decipher this filing, and why the price if part of registration only(tax basis for Wang??)

Gaf, from the S-8:

Quote
[Share price] Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) or 457(h)(1) under the Securities Act of 1933, as amended, based on the average of the high ($17.93) and low ($17.14) sales prices for the Common Stock on March 25, 2011, as reported for such date on the New York Stock Exchange.

Looks like they only use the pricing to calculate the registration fee.  I'm not very sophisticated when it comes to deciphering filings, so if anyone has a better answer then I'd love to hear it.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on April 01, 2011, 08:15:19 PM
Thanks Val,  I missed that,

as you say deciphering SEC  filings is difficult

Gaf
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on April 02, 2011, 06:07:10 PM
Myth, YOU are a pretty good market timer, I've been sitting on SSW for ages :)

Good point, LOL a raising tide lifts all....

I would sit next to Jim Rogers as the second worst market timer if they put us all in order. I left a few dollars on the table, but needed some cash. Nice to be back in and I dont have to really think about doing anything till November.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on April 04, 2011, 08:51:35 AM
Man who lit the fuse under SSW today, over 700K traded in 2 hrs
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 04, 2011, 09:25:34 AM
Has there been news I am missing?  Earnings tomorrow and the stock is tanking today.  I already bought another block of shares as the knife fell.  Getting to my limit.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 04, 2011, 10:55:07 AM
No news that I've seen, just the usual.  SSW moves around a lot.

Probably a good buying opportunity given that earnings are coming out tomorrow and will likely be paired with an official confirmation of the dividend increase.
Title: Re: ATCO - Atlas Corp
Post by: menlo on May 04, 2011, 11:05:06 AM
My apologies if this index was posted earlier in the thread, but it's significantly different from the Baltic Dry Index and likely more relevant.

http://www.vhss.de/contex_eng.php (http://www.vhss.de/contex_eng.php)

Bloomberg has a graph of the longer time series as well:  http://www.bloomberg.com/apps/quote?ticker=CTEX2500:IND (http://www.bloomberg.com/apps/quote?ticker=CTEX2500:IND)
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 04, 2011, 03:17:56 PM
No news that I've seen, just the usual.  SSW moves around a lot.

Probably a good buying opportunity given that earnings are coming out tomorrow and will likely be paired with an official confirmation of the dividend increase.

I bought more. This feels like last quarter. Move down, decent quarter with good news, then settles, then up to $21. Hopefully we get a repeat. I have to start taking profits on these quick leap wins. Alot of round trips lately with SSW and WDC.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 04, 2011, 03:52:50 PM
I bought more. This feels like last quarter. Move down, decent quarter with good news, then settles, then up to $21. Hopefully we get a repeat. I have to start taking profits on these quick leap wins. Alot of round trips lately with SSW and WDC.
Me too.  I try not to be a market timer, but sometimes I can't help myself :)
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 04, 2011, 04:26:39 PM
I bought more. This feels like last quarter. Move down, decent quarter with good news, then settles, then up to $21. Hopefully we get a repeat. I have to start taking profits on these quick leap wins. Alot of round trips lately with SSW and WDC.
Me too.  I try not to be a market timer, but sometimes I can't help myself :)

I do this over and over.  I keep the majority of the shares but trade a minority.  Bought a thousand yesterday.  Will sell in increments of 200 starting above 19.  Satisfies the restless side of my nature.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 04, 2011, 05:01:20 PM
I bought more. This feels like last quarter. Move down, decent quarter with good news, then settles, then up to $21. Hopefully we get a repeat. I have to start taking profits on these quick leap wins. Alot of round trips lately with SSW and WDC.
Me too.  I try not to be a market timer, but sometimes I can't help myself :)

I do this over and over.  I keep the majority of the shares but trade a minority.  Bought a thousand yesterday.  Will sell in increments of 200 starting above 19.  Satisfies the restless side of my nature.

Is it weird working with bigger numbers? My sizable position is your trading money lol. Also how are the returns on the trading capital, I have waited for Fair Value on these things and been burned quite a bit. I am thinking about doing this a bit more...
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 04, 2011, 08:41:28 PM


Is it weird working with bigger numbers? My sizable position is your trading money lol. Also how are the returns on the trading capital, I have waited for Fair Value on these things and been burned quite a bit. I am thinking about doing this a bit more...
[/quote]
RE: weirdness - Dont give it much thought.  I try to think with ratios rather than absolutes.  At the rate your learning Myth you will do very well - I am likely somewhat older than you.  How to get rich:  Get returns > 0, and dont die.

I have never broken out returns on this type of trading.  I bought and held a bunch of stocks incl. FFH from the mid/late 90s until 2004.  I round tripped a few stocks and just got frustrated.  The biggest hit I made in that whole time was buying when the markets opened after 911.  Thus the trader side was born.  I learned not to take Buffett literally.  Now I make it a process to take some profits well below any mental target I may have.  I also am willing to buy above low targets if the situation is stable or improving such as SSW.  To be fair this is somewhat more lucrative in Canada than the US - we dont have the long term/short term tax differentiation and our capital gains tax is quite low.  With trading fees so low there is nothing stopping anyone from exiting a position and re-entering it later.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 05, 2011, 12:48:35 PM
Uccmal thanks for the advice, I plan on trying this going forward. Nothing worse then developing a thesis, researching a stock, getting it right, then being round tripped. I saw with FBK that you were very good at timing your sells. Usually getting out on good news, and buying back on bad news all while holding a core position.  SSW will be the first go around and maybe SD should they recover. From what I see we had decent earnings, but picked a horrible day to report lol.

Our taxes make it more complicated, but my Roth / 401k balance is getting decent and I would have loved to some booked gains on a day like this...

Heres to avoiding 0
Title: Re: ATCO - Atlas Corp
Post by: FlyingArrow on May 05, 2011, 12:56:48 PM


Heres to avoiding 0

Heres to avoiding death....   ;D
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 06, 2011, 11:33:16 AM
I believe people (like myself) find the idea of using retained cash flow to seek new growth as repulsive.  The thesis is to get the stock price up in order to profit on the trade.  Cutting the dividend in 2009 ostensibly to fill in a cash hole has morphed into keeping it low for longer than it needs to be in order to fuel empire building (IMO).

Hole filled, dividend back please!  I really don't care if Gerry has nothing else to do.  The reason why I sold 60% of my stock was because I expected them to behave this way once they announced their new joint venture plans.  I take it a lot of other people weren't as pessimistic as me and rode the stock up to 20+ thinking the dividend would soon come roaring back.  Now it's back to slightly below where I made my last sale.

The reason why I don't want them to reinvest in new ships is that it's just pointless.  If I want more ships at that yield I can just buy more shares at this price (price is approximately where you buy the existing fleet for the same economics as they buy new ships).  To get that to change, raise the dividend!  Then we can take the money and buy things like HPQ that are better (IMO).
Title: Re: ATCO - Atlas Corp
Post by: finetrader on May 06, 2011, 12:07:36 PM
talk about agency cost.. the biggest expense for a small shareholder.

The bigger the size of Seaspan is the bigger Gerry's salary and bonus will be.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 06, 2011, 12:43:03 PM
Hole filled, dividend back please!  I really don't care if Gerry has nothing else to do.  The reason why I sold 60% of my stock was because I expected them to behave this way once they announced their new joint venture plans.  I take it a lot of other people weren't as pessimistic as me and rode the stock up to 20+ thinking the dividend would soon come roaring back.  Now it's back to slightly below where I made my last sale.

I might agree, except that they announced the new dividend policy and growth strategy prior to the run-up.  We're still up 12% from that point (over a six week period - annualized, that's a 267% compound gain).

There's nothing that says they will use retained earnings for the entire equity portion of their growth strategy.  They are keeping their options open.  If the stock tanks again and their only choice is to cut the dividend or dilute the hell out of the shareholders then they are going to be in a terrible position.  They're withholding the dividend because they can.  When they've determined what the next growth phase will actually be, then they will decide on how to fund this growth.  Ruling out retained earnings today will just cost them the option tomorrow.

I'll reiterate this because I think it's important.  Seaspan management spent the past two years fighting for equity because they were caught offside on a market crash.  The market determines the value of your stock and you cannot control it.  Eric, if you're right and $18 is non-dilutive, then they will probably issue stock instead of using RE for equity.  But if they contract out to buy the vessels while raising the dividend and the stock ends up trading at $10 then how pissed off am I going to be?  Really pissed off.  Especially because they already went through this.

FT you are right.  Gerry's compensation is tied directly to the deals that he does.  Something like $50mm in stock over the next two years is at stake.  After that, a long-term operations focused CEO with man the helm (whoever that may be..).

Like it or not, they've shared the plan.  They are going to grow.  Gerry's vision has long been 100 Seaspan ships.  That's 31 new vessels signed for within the next 2 years.  I expect it to happen.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 06, 2011, 01:07:23 PM
Eric, if you're right and $18 is non-dilutive, then they will probably issue stock instead of using RE for equity.

At $18 we are getting a cash-flow return of about 20%.  Because the fully diluted cash flow per share is about $3.60 after existing contracted ships delivered in 10 months from now.

But you don't get 20% returns on new ships just by financing 100% with cash.  You have to lever them to the hilt just like the existing fleet.  And then there's financing risk, which is the only problem they ran into before (the newbuilds dropped in market price which made their lenders require more cash down payment upon delivery).

So what's the point?  Give up 20% returns on the stock in order to get 20% return on new ships?  Meanwhile taking on the same sort of newbuild financing risk that led to dilution recently?

Sure, the equity raise might happen at $25.  But based on that they're giving up a 14.4% yield in order to get a 20% one.  Okay, that's accretive but not the world's finest growth rate in terms of what it will mean for cash flow per share.  

The only exciting way to grow the cash flow per share is not by share issuance, but rather by retaining the cash flow for new ships.  Thus, my pessimism for the willingness of them to give us our dividend.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 06, 2011, 02:07:28 PM
I see both your points. On the board we were excited last year at around $10 due to ever rising dividends due to fleet coming online. We won either way, either with double digit yield on $10 a share or a share price increase as the yield traded down to 7% or so. That is obviously not going to happen, the share price may go up, but not as much as with dividend raises.

VAL this was communicated so I can see where you are coming from. But it does smell like emperor building for the sake of. They could simply not buy any ships. Take delivery of a the rest, hold some capital, and pay out all excess capital. They will get a higher return with the new ships, but the risk is the economy inmo. Those who bought during the down turn want to be paid off now.

Its tough. The only thing we can do is buy or sell. I sold all shares, bought a few options. Not sure what will happen. People may buy in due to growth, or they may sell due to reduced income.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 06, 2011, 02:14:30 PM
Hopefully if they are hell bent on raising cash flow per share they will instead make what is the best decision for shareholders.  Which is to buy shares back instead -- it carries no financing risk, and yields the same returns as buying new ships.

But no, that doesn't serve his ego, or his pocketbook.

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 06, 2011, 02:40:26 PM
Eric, Val, Myth, I am glad to have all these different points of view.

One other possibility is that Gerry has already got commitments for all of the new ships, or at least strong interest expressed from some of his sounder customers.  If that is the case and each ship comes on line and immediately accretes to cash flow than that would be okay with me. 

If they continually add to debt and perpetually delay the dividend increases I will lose interest.  If they run New Company with its own capital structure completely and SSW receives only dividends from New Company, I am okay with that as well, unless NEWCO takes business from SSW. 

My concern is that there must be an upper limit to the total number of ships any one company can run.  At a certain point, probably long ago, there are no more economies of scale to be had, and all you are doing is taking on financing risk.  A smaller/slow growing SSW that raises its dividend 20% per year would work for me as well as the Empire building.   

This is part of investing.  No situation is perfect.  The only time in my investing career I have been virtually all in one company is FFH in 2006 - probably peaked at 60-70%.  I would never do that now with anything, except cash. 

Myth, My buy and trade routine is not working out as fast as I would like this time; :P  Always a downside - good thing for the >4% yield.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 06, 2011, 02:55:02 PM
Eric, Val, Myth, I am glad to have all these different points of view.

One other possibility is that Gerry has already got commitments for all of the new ships, or at least strong interest expressed from some of his sounder customers.  If that is the case and each ship comes on line and immediately accretes to cash flow than that would be okay with me. 

If they continually add to debt and perpetually delay the dividend increases I will lose interest.  If they run New Company with its own capital structure completely and SSW receives only dividends from New Company, I am okay with that as well, unless NEWCO takes business from SSW. 

My concern is that there must be an upper limit to the total number of ships any one company can run.  At a certain point, probably long ago, there are no more economies of scale to be had, and all you are doing is taking on financing risk.  A smaller/slow growing SSW that raises its dividend 20% per year would work for me as well as the Empire building.   

This is part of investing.  No situation is perfect.  The only time in my investing career I have been virtually all in one company is FFH in 2006 - probably peaked at 60-70%.  I would never do that now with anything, except cash. 

Myth, My buy and trade routine is not working out as fast as I would like this time; :P  Always a downside - good thing for the >4% yield.

My issue is I am constantly fidgety and nervous about the economy and businesses in general. Wang seems a bit too excited, and I saw the same thing in the tanker market. This business is very different and much more conservative, but I prefer growth when things are bad, and smooth sailing when things are good. I just dont see the point of investing in this economy, bad times in my opinion will come soon enough.

I think he has the customers locked up and everything looks great, but at some point inmo they wont. Better to payout 85% cash, hold a bit back, perhaps get a revolver and pay down some debt. Get terms on the revolver out 4 years and use that during downturns. I would prefer something like that. Relax, age the fleet, and buy when others get overextended. He has a strong backer so perhaps the downside isnt too big.

---

I agree with you though. Take care of shareholder A who wants a div, take care of shareholder B who wants growth, or take care of yourself (growth again). So we all know where its going.

Uccmal - I have learned alot and really adjusted my format / game plan, just need to trade a few things to raise a bit more cash. I will be doing buy and trade a bit more, vs. buy and hold for IV. I predict decent gains once it gets going - just need an uptick in the market lol. Thanks for the tip.
Title: Re: ATCO - Atlas Corp
Post by: schin on May 06, 2011, 06:03:50 PM
I was looking into openning a put position by selling some leaps. Nov 11 - 17.50 Puts @ 2.1.  My questions to the board is:

If SSW declares normal dividends, it would just reduce the market price... Even if it trades at 18 dollars, and declares a dividend. The market will adjust the price ex-dividend and I could get putted in Nov.

All things being equal, I wouldn't mind 2.10 to reduce my cost basis on SSW to 15 and change -- if I need to buy it. Does anyone sell puts on stock which you expect a large(r) dividend payout. Is that a bad recipe?

Thoughts?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 06, 2011, 08:48:00 PM
schin, Isn't the objective of selling the puts to get the income?  I know that investment textbooks all talk about the price of a stock trading down after a dividend but I have never seen it consistently occur in practice.  SSW pays a 4.2% dividend at todays close.  That should put a floor on the stock at some level 0.75/0.05 = 15 perhaps. 

Wouldn't keeping your duration as short as possible give you the greatest chance of getting your income.  Say 2-3 months out, write another set in a month, rpt, rpt again.  I am by no means giving advice here just trying to work out what makes the most sense to me.
Title: Re: ATCO - Atlas Corp
Post by: finetrader on May 07, 2011, 08:18:18 AM
schin,

puts are usually more expensive and calls cheaper on companies that pay a big dividend.

I also sold a few puts on SSW at 17.50$ strike so that I either get to buy at around 15.50$ or keep the premium for me.
Title: Re: ATCO - Atlas Corp
Post by: schin on May 07, 2011, 06:50:15 PM
Uccmal,

Yup, the point of selling options is to keep the option. The challenge I often run into is the liquidity and pricing in the options market.

Sell out of money puts don't provide the risk/reward ratios after factoring in the spread and commission I pay. I don't trade a lot of contracts.

Also, the larger investment question I'm trying to get help on is...

Given 2 stocks with relatively low P/Es (Cisco -- which pays a minimal dividend or SSW -- which pays a 4-5% dividend.)... which is a safer options bet?

I've generally seen at-the-money options giving you 15-20% premium on LEAPS. So, worst case, you're in the position at 15% (premium received) relative the strike price.

For dividend payers, I'm wondering if it's premium - dividend rate as your margin of saftey before you enter the position.  For example, Stamps.com or Interactive Brokers, who have paided out special dividends.

As a put holder, you don't get that distribution and it affects the market value price.  Just wondering about the thoughts of the board.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 17, 2011, 12:27:35 PM
I listened in on the investors presentation today, pretty interesting discussion.  Gerry Wang was in a feisty mood and kept reiterating that he was going after ship builders for blood.  His main argument was that during periods of growth, the ship builders would bleed him.  Now he's looking to win back his pound of flesh in the form of cheaper, more advanced vessels.

There were a few hints dropped about expansion plans.  By far the most interesting that I recall are:
 - 10-15% growth per year for the next "5 year plan".
 - The Chinese customers (CSCL and COSCO) are looking at growing their fleet by 15% or so over the next five years.
 - Seaspan will be paying < $10,000 per TEU for new vessels, whereas they used to pay $15,000 per TEU.
 - The new ship design means that fuel consumption for a 10k TEU vessel will be equal to that of a 5k TEU vessel.

I'll give the math a hard look in a few weeks, but this is looking promising in terms of controlled, managed growth for Seaspan.  Eric, I thought you'd be most pleased by the 10-15% growth number.  That's 40k-60k TEU per year, or 4-6 ships...  really quite a bit slower than what we've seen in the past.  And once again that gets us right near the 100 ship number.

Ok, quick look at the math because I can't help myself.  The usual debt/equity ratio has been 40/60.  That's $200mm of equity, $300mm debt for 5 vessels.  Gerry mentioned on the call today that they're at about 50% now, but I think that's due to their equity panic over the past few years.

Cash available for distribution at the end of 2012/early 2013 will be about $300mm.

If $200mm goes to equity for the year for all new vessels, that leaves $100mm for the dividend, which is about double what we're getting today, and that's assuming the whole thing is financed through equity.

I see this as a "worst case scenario" for the dividend.  It assumes all future growth will be executed using debt plus retained earnings, but it gives credence to the idea of $1.50/year in 2013.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on May 17, 2011, 02:31:50 PM
Thanks Val for posting the info from the conf.  Hopefully a replay is available

I like the idea of controlled growth over the 5yrs., and $100 mil for a 10,000 teu ship is a hell of a reduction from the costs of the 13500 ships

 Things that I see that keep the div from going to 1.50 is the conversion of the pfd A shares in 2014, and the debt repayment that begins when all present ships are delivered- could be refinanced tho
 
 Was the new investment vehicle mentioned as a partner in these new ships??
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 17, 2011, 03:38:15 PM
- The new ship design means that fuel consumption for a 10k TEU vessel will be equal to that of a 5k TEU vessel.

Uhh...

So what happens to more than 1/2 of their current fleet?  They have a ton of these 4k-5k TEU vessels.  In fact, some haven't even been delivered yet -- are those toast after just 12 years in service?

And who is going to want their existing 13,100 ships in 12 years when new ones with similar fuel efficient design are just around the corner?

Are they going to be in demand when they come off lease?

30 year ship lifetimes?

How will scrapping those ships pay for the debt on them?  And if they don't, won't the creditors go after these new fuel-efficient ships that they plan to have built?

Isn't it better to scuttle the growth plans and pay out the dividends to ensure the shareholder actually gets to keep the distributable cash flow?
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 17, 2011, 07:28:14 PM
Eric, I don't think the fuel efficiency thing is the be-all/end-all of shipping.  It's just another advantage.  If fuel efficiency were the deciding factor, these vessels would have kept slow steaming through 2010 while the liners brought on more capacity, and clearly that isn't the case.  Or, looking at another example, 8k vessels are significantly more efficient than 5k vessels, yet their introduction hasn't destroyed the market for 5k vessels, which continues to thrive.

I won't comment on the dividend directly, but I will say that the economics for ship building, the long-term view of the container trade, and Seaspan's particulars (scale, credit, credibility) are currently converging in an advantageous way.  I don't mind waiting it out.  I'm patient and long-term.

The slide deck and the recorded call were available to listeners earlier today.  If you're interested, it's a good listen.  Hearing Gerry Wang rip into the ship builders is worth the price of admission. :)
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on May 17, 2011, 07:39:54 PM
just finished listening to webcast,
Wang is certainly fired up, and believes that SSW has advantage over the pricing and design of newbuilds
there were two things I heard that sounded new
1st, Wang mentions near the end that SSW wants to keep their fleet young , and said that they would dispose of older ships over time
2nd, said that the payout ratio was 20% and the board was looking at increasing the %, nothing definitive tho
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 17, 2011, 08:52:44 PM
Perhaps I over did it a bit.  Well, good I hope we make more money.

There must be a lot of profit in those ships.  That's a huge price reduction.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 17, 2011, 09:11:08 PM
ERICOPOLY I think your points were fair and I really liked the way you inverted. Thinking about the ships in service and what happens if everyone upgrades or the market tightens was something I didnt consider. Wang seems to have covered all his corners. If he sales older ships as they age and keeps the fleet new. I think its a great investment, just doesnt match the thesis I set forth on the buy. I think they are doing whats best for long term shareholders like Val.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 18, 2011, 04:21:45 AM
Myth, this is an easy stock to hold long term, for now -how's that for an oxymoron.  I keep sizing up my position slowly on the dips.  A 4% dividend yield at this time with a progressive increase coming. 

I have held this for over 2.5 years and gotten to know it - that's one of my favourite scenarios.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 18, 2011, 08:51:23 AM
Eric, I don't think you overdid it at all.  Honestly when I read your post I had a brief panic attack - both because I thought you were right on and because I was disappointed in myself for missing such a critical impact to the business model.  I initially wrote up a long response about how this isn't the first time efficient ships were introduced, and it'll take years to work through the fleet, and yadda yadda yadda..  it took me an hour or two of good thought and research before I came up with the counterexamples that I presented.

I guess this is my round about way of saying thanks for giving proper consideration to the other side of the coin.  I'm glad you're able to act as a counter balance to my enthusiasm regarding Seaspan.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 18, 2011, 09:58:59 AM
Myth, this is an easy stock to hold long term, for now -how's that for an oxymoron.  I keep sizing up my position slowly on the dips.  A 4% dividend yield at this time with a progressive increase coming.  

I have held this for over 2.5 years and gotten to know it - that's one of my favourite scenarios.

I agree but it just doesnt jive with my thesis. I was expecting a ramp up in dividend payouts. I bought at $9 or $10 and held for about 1.5 years. Then sold to raise capital, then bought options as a trade, now looking for an exit on the remaining portion of those. I think Wang is doing whats right, but I dont like the shipping business. It seems like a feast or famine deal. When its good its really good, and when not good its damn right brutal.

I want my feast, because I fear another famine.  Plus at my age I prefer capital gains. Without rises in the dividend we wont see many capital gains inmo. I think they are doing whats right, it just doesnt fit the original thesis.
Title: Re: ATCO - Atlas Corp
Post by: menlo on May 18, 2011, 10:14:41 AM
World Shipping Council overview of liner ships (includes containerships, so somewhat relevant to SSW).  SSW does not appear to be a member.  Opens as a pdf.

http://www.worldshipping.org/public-statements/2011_Container_Supply_Review_Final.pdf (http://www.worldshipping.org/public-statements/2011_Container_Supply_Review_Final.pdf)
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 18, 2011, 10:23:04 AM
I agree but it just doesnt jive with my thesis. I was expecting a ramp up in dividend payouts. I bought at $9 or $10 and held for about 1.5 years. Then sold to raise capital, then bought options as a trade, now looking for an exit on the remaining portion of those. I think Wang is doing whats right, but I dont like the shipping business. It seems like a feast or famine deal. When its good its really good, and when not good its damn right brutal.

I want my feast, because I fear another famine.  Plus at my age I prefer capital gains. Without rises in the dividend we wont see many capital gains inmo. I think they are doing whats right, it just doesnt fit the original thesis.
Myth, I won't argue with your thesis or your position on cap gains vs. your age, but I do want to look at the cap gains numbers.  Assuming the 5% yield sticks and the $1.50 is right, then in 2013 we're looking at $31.50/share incl. dividends.  Which is 85% in less than two years - about 36% per year.  Maybe I'm dead wrong on the div and the gain, but I think I'm in the 80% right zone, which still puts me at 28% per annum.  Maybe that's below the expected return in this market, but I'll take what I can reasonably assess as probable.

I'll note that during feast and famine, Seaspan's operations and customers have performed exactly as expected.  Their financing got screwed, though, so they're not impervious to flaw :D

PS. This is one of the things that keeps me from investing in a company like MSFT..  85% value creation for them means that they need to create about $160bn in present value gains.  It just seems like such an improbably large number.  Maybe I need more imagination or something, but I see SSW creating $1bn more quickly than MSFT creating $160bn.
Title: Re: ATCO - Atlas Corp
Post by: txlaw on May 18, 2011, 12:04:38 PM
Thought you guys might be interested in the following article:
http://blogs.wsj.com/law/2011/05/18/slow-steaming-or-anticompetitive-behavior-the-eu-wants-to-know/

I have no dog in the fight when it comes to SSW.  Just providing info.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 18, 2011, 01:12:36 PM
Myth, Building on Val's numbers, which are probably not wildly optimistic, I have a company that I have held for a long time that has:
1) Cut its dividend during a tight financing, and overgrowth period
2) Raised its dividend back up when cash flow returned
3) Has avoided unnecessary share dilution with some skilfull deals.
4) Appears to be have honest and capable management.
5) Appears to have a long term good client base.
6) May growth at 30% in stock price cagr over 2 years while having the margin of safety of a consistent 4% dividend.

Probably the most key thing for me is the correlation between owning companies for a long time and outsize returns.  All of my biggest hits by far have come from long term holdings.  Obviously some survivorship bias but often my biggest returns have come after any notional target price has been reached.  I also have other more speculative Graham and Dodds kicking around to fill the low return void of SSW :P
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 18, 2011, 01:37:10 PM
I agree with you guys. I have a few singles and doubles and 2 grand slams (ATSG, and SD).

ATSG was gut wrenching but worked out exceedingly well. At my capital base I feel as though I need to stick and move. I have 3-4 long term holdings for 2 - 4 years. SSW is just in an industry I dont like, and I dont like the focus on growth. I have too many stocks tied to oil prices, global recovery, and rising dividends lol. The market was under supplied, then fairly supplied, then oversupplied due to world wide recession, then slow steamed, and now we are under supplied again.

I dont feel comfortable betting on world wide growth, China's continued rise, or a rationale containership market. Which inmo is what you have to do if you hold SSW for the long term. Shipping is just one of those industries, ERICOPOLY inmo is correct and SSW should pay its shareholders now and perhaps form another venture to buy other ships. Rising the div to a 60% payout ratio would do wonders for the shareprice today inmo.


Also empire builders are well empire builders. These guys will focus on growth until something turns the market. Then they will be on the defensive again. At least at FRO or NAT. Shareholders got massive dividends during good times. Also the customers performed well, but what happens if China slows down just from being overheated / inflation / other woes. I think they are doing the right thing, and also believe they have covered their bases in terms of the model. I also really like the efficiencies on new ships which act as a call option on rising oil prices. That combined with selling off older smaller ships will make SSW very relevant.

I will be in and out, and will probably be back for the long term after some sort of shock. But in this environment I cant buy and hold given where they want to go.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 18, 2011, 04:49:57 PM
Good press in the journal. Cspan lol.

http://online.wsj.com/article/SB10001424052748704281504576331491017789286.html
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 18, 2011, 07:46:56 PM
Good press in the journal. Cspan lol.

I remember Seaspan got some play on Cramer once.  "I'd rather watch C-SPAN than buy Seaspan!" and then he hit some bearish button.  The hilarious part was when Seaspan went on his recommended list a few months later.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 19, 2011, 11:55:55 AM
I agree but it just doesnt jive with my thesis. I was expecting a ramp up in dividend payouts. I bought at $9 or $10 and held for about 1.5 years. Then sold to raise capital, then bought options as a trade, now looking for an exit on the remaining portion of those. I think Wang is doing whats right, but I dont like the shipping business. It seems like a feast or famine deal. When its good its really good, and when not good its damn right brutal.

I want my feast, because I fear another famine.  Plus at my age I prefer capital gains. Without rises in the dividend we wont see many capital gains inmo. I think they are doing whats right, it just doesnt fit the original thesis.
Myth, I won't argue with your thesis or your position on cap gains vs. your age, but I do want to look at the cap gains numbers.  Assuming the 5% yield sticks and the $1.50 is right, then in 2013 we're looking at $31.50/share incl. dividends.  Which is 85% in less than two years - about 36% per year.  Maybe I'm dead wrong on the div and the gain, but I think I'm in the 80% right zone, which still puts me at 28% per annum.  Maybe that's below the expected return in this market, but I'll take what I can reasonably assess as probable.

I'll note that during feast and famine, Seaspan's operations and customers have performed exactly as expected.  Their financing got screwed, though, so they're not impervious to flaw :D

PS. This is one of the things that keeps me from investing in a company like MSFT..  85% value creation for them means that they need to create about $160bn in present value gains.  It just seems like such an improbably large number.  Maybe I need more imagination or something, but I see SSW creating $1bn more quickly than MSFT creating $160bn.


There's somewhat of a difference here.  SSW gets it's earnings by borrowing money to buy assets.  I'm not sure you can value it strictly on cash flows.  I think it needs to be valued on it's assets to some degree + some premium for the additional cash flows they get for providing crews and management services.  

I bring this up because I struggled to justify to myself whether or not the price is being influenced by rational people right now, and whether I would be correct in my assumption that a higher payout would lead to the $25+ price I was expecting.

In other words... if a commercial REIT buys up a lot of properties at 14% yields, using 6% interest loans and 25% down.  How much of a premium to book value should it trade at?  Similarly, another REIT buys up properties at 14% yields and uses cash only.  The former has more intrinsic value than the latter, assuming all ends well.  Do they both trade at intrinsic value?  Should they both trade at the same multiple to liquidation value, with the former generating better returns?

Do these things get valued only on cash flow, or is risk-adjustment important?

I think at the expectations for SSW share prices in the high $20s for example, that's roughly 10x distributable 2012 cash flow.  Couldn't you get the same return by investing in ships WITHOUT using any leverage?  So in what way is that a rational means of valuing SSW?  Who here thinks a highly leveraged company should trade on the same multiple to distributable cash flow as a completely debt free version of the same assets?



Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 19, 2011, 12:51:35 PM
There's somewhat of a difference here.  SSW gets it's earnings by borrowing money to buy assets.  I'm not sure you can value it strictly on cash flows.  I think it needs to be valued on it's assets to some degree + some premium for the additional cash flows they get for providing crews and management services.  
I'm not sure which part of my post you're referring to here - the comparison with MSFT ?

In other words... if a commercial REIT buys up a lot of properties at 14% yields, using 6% interest loans and 25% down.  How much of a premium to book value should it trade at?  Similarly, another REIT buys up properties at 14% yields and uses cash only.  The former has more intrinsic value than the latter, assuming all ends well.  Do they both trade at intrinsic value?  Should they both trade at the same multiple to liquidation value, with the former generating better returns?

Do these things get valued only on cash flow, or is risk-adjustment important?

I think at the expectations for SSW share prices in the high $20s for example, that's roughly 10x distributable 2012 cash flow.  Couldn't you get the same return by investing in ships WITHOUT using any leverage?  So in what way is that a rational means of valuing SSW?  Who here thinks a highly leveraged company should trade on the same multiple to distributable cash flow as a completely debt free version of the same assets?
I'm not sure about REITs.  It's not my specialty, which is why I don't participate on those threads.  I see the analogy, but I think commenting will only lead to confusion.

SSW seems to be valued on a few different metrics - #1 dividend, #2 cash flow, #3 assets - debt.  I break out 3 because book value or intrinsic value don't really describe it.  I think a lot of SSW's high valuation in '07 was due to the replacement cost of their container ships.  Well, they're not as valuable now because the yards are building them more cheaply, so really #1 and #2 are what drive the price today.

Yes, I think that if you didn't use leverage you would create the same cash flows, but you wouldn't create the same value for shareholders.  Let's say fair value is 3,000 based on 10x DCF.  If you go the pure equity route, you save on the interest costs - 6% * 2,500 debt = 150, so DCF = 450, but you have to put up more on the equity side.  So instead of 100mm shares we'd have 240mm shares (assumes 40/60 equity/debt split).  Price per share = 4500 / 240 = 18.75.  Same numbers with the current debt equity split is 3,000 / 100 = 30 per share, as you pointed out. [Edit: fixed my math here]

The equity picture is actually worse because there's a tax shielding effect associated with debt cost (i.e. when you finance with debt, you don't pay tax for that finance cost.  You will pay tax on the additional profits associated with the 100% equity approach, so DCF is closer to 400 but whatever the point is made.).

This is a simple model, but I think it fairly illustrates why debt it used the way that it is.  If I were the Washington family, I'd probably prefer a 100% debt capital structure, but clearly that won't fly because banks won't lend that kinda dough at those rates without having equity participants around to absorb the blow if things go sour.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 19, 2011, 01:06:04 PM
There's somewhat of a difference here.  SSW gets it's earnings by borrowing money to buy assets.  I'm not sure you can value it strictly on cash flows.  I think it needs to be valued on it's assets to some degree + some premium for the additional cash flows they get for providing crews and management services.  
I'm not sure which part of my post you're referring to here - the comparison with MSFT ?

In other words... if a commercial REIT buys up a lot of properties at 14% yields, using 6% interest loans and 25% down.  How much of a premium to book value should it trade at?  Similarly, another REIT buys up properties at 14% yields and uses cash only.  The former has more intrinsic value than the latter, assuming all ends well.  Do they both trade at intrinsic value?  Should they both trade at the same multiple to liquidation value, with the former generating better returns?

Do these things get valued only on cash flow, or is risk-adjustment important?

I think at the expectations for SSW share prices in the high $20s for example, that's roughly 10x distributable 2012 cash flow.  Couldn't you get the same return by investing in ships WITHOUT using any leverage?  So in what way is that a rational means of valuing SSW?  Who here thinks a highly leveraged company should trade on the same multiple to distributable cash flow as a completely debt free version of the same assets?
I'm not sure about REITs.  It's not my specialty, which is why I don't participate on those threads.  I see the analogy, but I think commenting will only lead to confusion.

SSW seems to be valued on a few different metrics - #1 dividend, #2 cash flow, #3 assets - debt.  I break out 3 because book value or intrinsic value don't really describe it.  I think a lot of SSW's high valuation in '07 was due to the replacement cost of their container ships.  Well, they're not as valuable now because the yards are building them more cheaply, so really #1 and #2 are what drive the price today.

Yes, I think that if you didn't use leverage you would create the same cash flows, but you wouldn't create the same value for shareholders.  Let's say fair value is 3,000 based on 10x DCF.  If you go the pure equity route, you save on the interest costs - 6% * 2,500 debt = 150, so DCF = 450, but you have to put up more on the equity side.  So instead of 100mm shares we'd have 240mm shares (assumes 40/60 equity/debt split).  Price per share = 4500 / 240 = 18.75.  Same numbers with the current debt equity split is 300 / 30 = 30 per share, as you pointed out.

The equity picture is actually worse because there's a tax shielding effect associated with debt cost (i.e. when you finance with debt, you don't pay tax for that finance cost.  You will pay tax on the additional profits associated with the 100% equity approach, so DCF is closer to 400 but whatever the point is made.).

This is a simple model, but I think it fairly illustrates why debt it used the way that it is.  If I were the Washington family, I'd probably prefer a 100% debt capital structure, but clearly that won't fly because banks won't lend that kinda dough at those rates without having equity participants around to absorb the blow if things go sour.


I'm not criticizing their choice of using debt, which seems to be what you are justifying.  I agree with you it seems like a good risk-adjusted idea.

I'm criticizing the analysis that tries to put a multiple on their distributable cash flow without taking into account the level of leverage.  It just doesn't make sense, because one winds up with situations where one is expecting somebody to buy the shares at a price far in excess to liquidation value.  Another version of the company with the same assets but without using leverage is also going to sell for the same multiple to cash flow, yet at 1x liquidation value?  

EDIT:  The person buying the highly levered version of the company ought to see outsized returns for the extra risk, but that's not going to happen if he buys it for the same multiple to cash flow as the no leverage version.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 19, 2011, 01:48:06 PM
I'm criticizing the analysis that tries to put a multiple on their distributable cash flow without taking into account the level of leverage.  It just doesn't make sense, because one winds up with situations where one is expecting somebody to buy the shares at a price far in excess to liquidation value.  Another version of the company with the same assets but without using leverage is also going to sell for the same multiple to cash flow, yet at 1x liquidation value? 
Most businesses are valued far in excess of liquidation value...  so I'm still confused at that example.  Certainly the leverage is important, but the cost of the leverage is already taking into account in DCF.  The risks associated with leverage is something else entirely.  More highly levered companies have greater exposure to refinancing risk, interest rate risk, covenant breaches, etc.  So, yeah, I'd say a company with higher leverage might be worth 8x DCF vs. a company with lower leverage that might be worth 10x DCF.

Ultimately, the market will decide if the number for SSW should be 5x, 8x, or 10x, and that decision will be based on how reliable those cash flows appear to be.  The risk associated with the leverage will be accounted for.  Currently we're at about 5.5x DCF - 1.2bn for ~220 DCF.  That seems kinda low, considering there are about 8-9 years left on average for all charters, with the bigger/better charters being the newer ones.  But there are leverage risks and asset depreciation to consider.  But there's also growth to consider.

In a stable state (plateauing at 100 ships for example), probably something like 6-8x DCF seems right, but that's gut feel more than anything.

Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 19, 2011, 02:21:51 PM
I'm criticizing the analysis that tries to put a multiple on their distributable cash flow without taking into account the level of leverage.  It just doesn't make sense, because one winds up with situations where one is expecting somebody to buy the shares at a price far in excess to liquidation value.  Another version of the company with the same assets but without using leverage is also going to sell for the same multiple to cash flow, yet at 1x liquidation value? 
Most businesses are valued far in excess of liquidation value...  so I'm still confused at that example. 

Alright, suppose I start a holding company that raises cash at 6% to buy SSW preferred stock which is yielding 9%.

What multiple to book value should it trade at?

To answer your question, most businesses trade at premiums to liquidation value because there is something intangible of value there -- for example, MSFT makes ridiculously high returns on equity without using any debt.  That "something" has value.

But the ship and the service of providing crews are the only value -- there is no other intangible.  They merely take that value and lever the crap out of it.



Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 19, 2011, 03:43:40 PM
Alright, suppose I start a holding company that raises cash at 6% to buy SSW preferred stock which is yielding 9%.

What multiple to book value should it trade at?
I see what you're saying.  If a ship were its own company with its own charter that made 15%, and Seaspan was just a 40/60 equity/debt vehicle that invested in these ship companies, then why would SSW be worth anything above or below the value of the ship?

To answer your question, most businesses trade at premiums to liquidation value because there is something intangible of value there -- for example, MSFT makes ridiculously high returns on equity without using any debt.  That "something" has value.

But the ship and the service of providing crews are the only value -- there is no other intangible.  They merely take that value and lever the crap out of it.
This seems to have gotten philosophical..  what is Value?  What is it worth? :D  Zen and the Art of Seafaring Vessel Maintenance

Really though, I think you're getting to a question of what a relatively good business is and what a relatively good price is.  I can map out where Seaspan goes from 1.25bn to 2.5bn.  I can't see where MSFT goes from 210bn to 420bn.  But maybe I don't have the imagination required.

Seaspan's value is there, and it's even measurable.  The value of Seaspan is reflected in the value of the charters.  Seaspan's value is this, for each contract:
Value =
  (annual revenue - annual opex) * n years
  + Value of ship in n years
  - Cost of ship finance over n years (all discounted back to today)

That's the math for the value that Seaspan adds over and above basic ship finance (which would result in value = 0).  The value comes in many forms, such as high quality operations (99% utilization rate), plug and play solution, discounted ship pricing, scale (ability to do big deals), financing.  The existence of SSW's customers prove that there's value above and beyond just providing a vessel leasing facility..  And you can even measure it with the formula above.

It's not Microsoft in terms of bootstrapping amazing value out of thin air, but most companies aren't Microsoft and I don't think that would keep me from investing in them.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 19, 2011, 04:00:48 PM
That's the math for the value that Seaspan adds over and above basic ship finance (which would result in value = 0).  The value comes in many forms, such as high quality operations (99% utilization rate), plug and play solution, discounted ship pricing, scale (ability to do big deals), financing.  The existence of SSW's customers prove that there's value above and beyond just providing a vessel leasing facility..  And you can even measure it with the formula above.

You are right.  There are some intangibles there which are worth paying a premium for.  However, you'd have that value even if they didn't employ leverage.  Once they leverage it, should "fair price" come at the same multiple to cash flow as the low-risk form of the company?

I have yet to see anyone's price target of SSW discuss this.  Perhaps this is because in the real world there is no such thing as risk-adjusted fair value?  Maybe it's all in my head?
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on May 19, 2011, 04:17:05 PM
 Turns out that this a  timely discussion of debt, SSW  just announced another offering of its pfd C shares ,  no mention of quantity as of yet, 
 another 10 mil shs would give them over $400 mil in cash,  wonder what they're up to , big ship purchase , purchase of Mng. sub??


Also interesting is that the existing C shs. traded heavily all day and were down over 5% at one point, yet SSW hadn't released the info to public , received my email after closing today.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 19, 2011, 05:35:30 PM
You are right.  There are some intangibles there which are worth paying a premium for.  However, you'd have that value even if they didn't employ leverage.  Once they leverage it, should "fair price" come at the same multiple to cash flow as the low-risk form of the company?

I have yet to see anyone's price target of SSW discuss this.  Perhaps this is because in the real world there is no such thing as risk-adjusted fair value?  Maybe it's all in my head?

Nah I think you're right.  There's the cost of leverage, which is already accounted for.  But the risk associated with leverage is something else entirely - failure to pay, failure to refinance, failure to meet various covenants.  So those are worthwhile considerations and would have an impact on valuation, but I'm not sure how big of an impact it would have.  Failure to refinance and meeting covenants seem remote.  Failure to pay is offset by their high credit customer base and proven chartering model.  So it's a factor, but not a huge one IMO - maybe from 10x to 9x DCF?  Assuming 10x DCF is the right price for the no leverage scenario.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 19, 2011, 05:50:11 PM
You are right.  There are some intangibles there which are worth paying a premium for.  However, you'd have that value even if they didn't employ leverage.  Once they leverage it, should "fair price" come at the same multiple to cash flow as the low-risk form of the company?

I have yet to see anyone's price target of SSW discuss this.  Perhaps this is because in the real world there is no such thing as risk-adjusted fair value?  Maybe it's all in my head?

Nah I think you're right.  There's the cost of leverage, which is already accounted for.  But the risk associated with leverage is something else entirely - failure to pay, failure to refinance, failure to meet various covenants.  So those are worthwhile considerations and would have an impact on valuation, but I'm not sure how big of an impact it would have.  Failure to refinance and meeting covenants seem remote.  Failure to pay is offset by their high credit customer base and proven chartering model.  So it's a factor, but not a huge one IMO - maybe from 10x to 9x DCF?  Assuming 10x DCF is the right price for the no leverage scenario.

It would be interesting if they would start a new unleveraged version of themselves.  Someone could conceptually go long on the new unleveraged one trading at 10x DCF and hedge by shorting the highly leveraged one also trading at 10x DCF.  Whenever on the cusp of financial crisis, this trade should work every time.
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on May 19, 2011, 07:39:36 PM
The probabilty of default can be estimated from the bind/pfd market.  So you can value the equity based upon distributable cash flows and probability adjsut the equity value by the probabilty of default.  For a B credit like Seaspan the 5-yr cum probability of default is 27.5% and the 10-yr is 36.8%.  So one way to risk adjust the DCF multiple is by reducing it to reflect the probability of default (which in this case would be 30%).  Therefore, a 10x unlevered multiple is equal to 7x B rated leverage multiple.

I have found this helpful in my analysis of leveraged firms as it provides me a discount to compare firms with different amounts of leverage.  These cum probilities decline to 3 to 5% at the A- rating so the effects on value for firms with greater than A- rating is very small.

Packer
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 19, 2011, 07:46:32 PM
Packer, interesting analysis.  How does the amount of debt vs equity factor in?  That is, if SSW had just 10% debt, would a B rating still take 30% off of the DCF multiple?  Or is the thinking that at 10% SSW would achieve an A rating?
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on May 19, 2011, 07:53:25 PM
The lower debt would result in a higher rating.  Another way to approach probabilty of default is the pricing of debt securities but the rating model (if the firm is rated) is simpler to apply.  This idea is described in detail in "The Little Book of Valuation" by Damadoran, a great read for this and other valuation techniques.

Packer
Title: Re: ATCO - Atlas Corp
Post by: txlaw on May 19, 2011, 08:58:14 PM
This is a real interesting discussion because I've had the same sort of debate internally about how ATSG should be valued by the market. 

I almost always use a debt-adjusted earnings yield-oriented valuation for going concerns that I think will be around for a while.  However, one sector where I don't really adjust for debt is the financial sector, where the whole point is to establish a company that borrows capital and deploys it in order to earn a spread. 

So the question I've been asking myself is whether a leaseco is more like a finance company than other companies.  In a way, with a company like SSW or ATSG, the company is set up primarily to borrow capital, buy assets, and lease the assets such that the leaseco captures the spread between its finance costs + depreciation and the rents it receives.  When I think about it that way, I can sort of see valuing the company by applying a multiple to owner earnings, which you can sort of think of as distributable cash flow, assuming no growth or shrinking of the business.

I still use a debt-adjusted valuation method for ATSG.  But I do wonder what the market would do if the company distributed all its owner earnings rather than growing the business.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 19, 2011, 10:33:58 PM
Humm I use debt adjusted valuations unless I am almost certain of the cash flows. I also like to see leases matching the life of the asset. SSW and ATSG provide a high level of certainty inmo. For some reason I am very comfortable with ATSG expanding, but not with SSW. There just seems to be more barriers with the freighters inmo.

txlaw with regard to ATSG, do you look at cash flow to EV, and how do you feel about the expansion? At some point I hope they distribute all of their earnings, but right now I like the expansion because the demand seems to be there, they avoid paying taxes, and the debt is at an extremely low rate when compared to SSW.

How do you guys feel about SSW paying 10% interest.

Title: Re: ATCO - Atlas Corp
Post by: Packer16 on May 20, 2011, 03:58:05 AM
You are right about SSW becauswe its customers are all AAA so the adjustment probably should be adjusted downward.  The current yield of the C preferred is somewhere in the 8%s, so the market thinks there is higher risk than there AAA customer profile would imply.

Packer
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 20, 2011, 07:04:55 AM
You are right about SSW becauswe its customers are all AAA so the adjustment probably should be adjusted downward.  The current yield of the C preferred is somewhere in the 8%s, so the market thinks there is higher risk than there AAA customer profile would imply.

What do you think about the seniority structure's impact on the market implied B rating?  It's something like this:
1. Bank Debt
2. Pref Shares - C (listed)
3. Pref Shares - A & B (unlisted)
4. Common

Pref shares are junior to bank debt, which makes up 60% of the asset financing.  Is there an implied discount of the C prefs awarded by the market?  That is, because they are the most senior form of capital, should the bank debt be rated higher than the pref shares?

In a way this is indicated by the 6% fixed rate on the debt, but that was then and this is now (for better or worse).
Title: Re: ATCO - Atlas Corp
Post by: txlaw on May 20, 2011, 07:14:07 AM
Humm I use debt adjusted valuations unless I am almost certain of the cash flows. I also like to see leases matching the life of the asset. SSW and ATSG provide a high level of certainty inmo. For some reason I am very comfortable with ATSG expanding, but not with SSW. There just seems to be more barriers with the freighters inmo.

txlaw with regard to ATSG, do you look at cash flow to EV, and how do you feel about the expansion? At some point I hope they distribute all of their earnings, but right now I like the expansion because the demand seems to be there, they avoid paying taxes, and the debt is at an extremely low rate when compared to SSW.

How do you guys feel about SSW paying 10% interest.


That's pretty much what I mean when I say debt-adjusted, looking at OE and EV.  If I were just buying the whole thing, assuming pay off of debt, what would I pay?  And what would that number look like given the passage of time?

But then there is the question of whether a leaseco is similar to a finance co.  We never talk about adjusting for debt when discussing banks or insurance companies, right?  It's always about ROE.

And are leasecos similar to REITs?

Also, utilities that the market likes seem to trade on ROE metrics.  Imagine if Sprint traded on OE with the same multiple as AT&T!

I like ATSG's expansion plans given their projected unlevered ROIC on the new planes, but I do wonder what Mr. Market would do if ATSG were allowed to pay a dividend.

I wish I had looked at SSW when all you guys were talking about it a while back.
Title: Re: ATCO - Atlas Corp
Post by: txlaw on May 20, 2011, 07:27:10 AM
I like ATSG's expansion plans given their projected unlevered ROIC on the new planes, but I do wonder what Mr. Market would do if ATSG were allowed to pay a dividend.

The one caveat to the unlevered ROIC comment is that ATSG seems to use EBIT over capital invested, but those newly purchased planes, though durable goods, are depreciating assets. 

So the unlevered ROIC measure overstates economic return on capital invested.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 20, 2011, 07:41:11 AM
How do you guys feel about SSW paying 10% interest.

I hope they aren't borrowing at 10% to buy assets at 12%.

Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 20, 2011, 07:41:45 AM
The one caveat to the unlevered ROIC comment is that ATSG seems to use EBIT over capital invested, but those newly purchased planes, though durable goods, are depreciating assets. 
SSW faces a similar issue with depreciating assets.  It'll take a while to get visibility, but my guess is that SSW will begin to sell off ships at the 18-24 year mark.  Management has made statements about the value of a young fleet, and given their usual charter lengths of 6- or 12- years, these numbers make sense to me.  They own, finance, and manage these vessels, so we should expect that they will take very good care of them since they are the ones who will end up holding the bag.

My limited understanding of ATSG indicates that they will be similarly motivated to maintain their fleet.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 20, 2011, 07:47:11 AM
I hope they aren't borrowing at 10% to buy assets at 12%.

They aren't.  It's a mixed capital structure.  8.5% for preferreds.  6% for bank debt.  ?? for equity / retained earnings.

Having more preferred / equity brings the cost of debt down, making for a more efficient capital structure.

Where does the 12% come from?
Title: Re: ATCO - Atlas Corp
Post by: txlaw on May 20, 2011, 07:50:11 AM
The one caveat to the unlevered ROIC comment is that ATSG seems to use EBIT over capital invested, but those newly purchased planes, though durable goods, are depreciating assets. 
SSW faces a similar issue with depreciating assets.  It'll take a while to get visibility, but my guess is that SSW will begin to sell off ships at the 18-24 year mark.  Management has made statements about the value of a young fleet, and given their usual charter lengths of 6- or 12- years, these numbers make sense to me.  They own, finance, and manage these vessels, so we should expect that they will take very good care of them since they are the ones who will end up holding the bag.

My limited understanding of ATSG indicates that they will be similarly motivated to maintain their fleet.


That's right, ATSG is similarly motivated.  And you can sort of figure out how much depreciation understates economic earnings by relying on management's maintenance capex figures.

But I don't think just using EBIT/cost for ROIC is acceptable without explaining that capex will be needed to maintain the assets over time.

By the way, what is SSW management's assessment of ROIC on new ships?  It must be high if they're borrowing at such high rates.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 20, 2011, 08:11:37 AM

By the way, what is SSW management's assessment of ROIC on new ships?  It must be high if they're borrowing at such high rates.
I've never seen this number published, but I'm going to try to work it out on my own.
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 20, 2011, 09:15:35 AM
They aren't.  It's a mixed capital structure.  8.5% for preferreds.  6% for bank debt.  ?? for equity / retained earnings.

There you go, that's true.
 
Where does the 12% come from?

On one of the conference calls, they claimed that they look for deals were the hurdle rate is 12% (my understanding is that 12% is what they would earn on the deal if no leverage were involved). 

ROIC is 21% on such a deal with 40% down payment and 6% interest rates.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on May 20, 2011, 09:34:21 AM

I wish I had looked at SSW when all you guys were talking about it a while back.

From looking at other posts, sounds like you have done just fine.

With that said I am eagerly awaiting JEast's next post.  ;D
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 20, 2011, 09:37:24 AM
On one of the conference calls, they claimed that they look for deals were the hurdle rate is 12% (my understanding is that 12% is what they would earn on the deal if no leverage were involved). 
Ok, that makes sense.  I worked up the numbers on the 8k and 13k vessels and got a naive IRR of about 11.5% - but it depends heavily on the value of the ship at the end of the 12 year contract (I assumed 75% of the purchase price).
Title: Re: ATCO - Atlas Corp
Post by: txlaw on May 20, 2011, 12:06:57 PM
From looking at other posts, sounds like you have done just fine.

Yeah, I'm doing okay.  We shall see what the rest of year holds.

With that said I am eagerly awaiting JEast's next post.  ;D

Agreed.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on May 22, 2011, 08:51:27 AM
I can map out where Seaspan goes from 1.25bn to 2.5bn.  I can't see where MSFT goes from 210bn to 420bn.  But maybe I don't have the imagination required.

I'm rethinking this thinking.  I can't get MSFT to $420bn in the next couple of years, but I can easily see them moving from 9.x P/E to 13-15 P/E.  I can also see 10% earnings growth per year.  That puts MSFT at ~ 22.75bn earnings / year.  P/E of 13 puts it at $295bn, P/E of 15 puts it at $341bn by 2013.  That's a 20% to 30% annualized return.  Plus it's a great company to own.

The return is not as good as what I forecast for SSW over the same time-frame, but less risky due to leverage, industry, etc.  Hmmm...  I feel like I've been doing the dance with MSFT forever.  Might be time to start doing the deed ;)
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on May 22, 2011, 09:47:34 AM
I can map out where Seaspan goes from 1.25bn to 2.5bn.  I can't see where MSFT goes from 210bn to 420bn.  But maybe I don't have the imagination required.

I'm rethinking this thinking.  I can't get MSFT to $420bn in the next couple of years, but I can easily see them moving from 9.x P/E to 13-15 P/E.  I can also see 10% earnings growth per year.  That puts MSFT at ~ 22.75bn earnings / year.  P/E of 13 puts it at $295bn, P/E of 15 puts it at $341bn by 2013.  That's a 20% to 30% annualized return.  Plus it's a great company to own.

The return is not as good as what I forecast for SSW over the same time-frame, but less risky due to leverage, industry, etc.  Hmmm...  I feel like I've been doing the dance with MSFT forever.  Might be time to start doing the deed ;)


It is the nice girl with a soft body that went on a crash diet.  Val is that "playah" who is cozying up to her, betting the fad diet won't last and the weight will come roaring back.  The value investor dumps the nice girls when that happens, then goes back to the steady diet of cheap and sleazy.  I wonder if men make more successful value investors.
Title: Re: ATCO - Atlas Corp
Post by: prunes on May 25, 2011, 09:30:15 PM
Have any of you looked at Safe Bulkers (SB)? The company is trading at 2x book but 4.5x earnings and pays a 7.7% dividend. The company is more susceptible to the spot market. Currently there are 16 ships with a remaining charter duration of 3.4 years and an average age of 4.1 years. The fleet is expected to grow 76% by 2014. The company is 82% owned by its CEO, whose family has a long history of experience with the shipping industry. Slightly concerning, the company sold 5,000,000 MM shares on April 11. This followed the company's IPO (sold 10,000,000 shares) in June 2008. In all, 71 MM shares exist.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 27, 2011, 03:56:15 AM
Prunes - RE: Safe Bulkers.  This is a different industry than SSW and a different business structure as well.  I have also looked at Genco and Baltic Trading ( a sub of Genco).  The Baltic Dry index is very low right now and SB, Genc, and Baltic Trading all trade to the Baltic dry index.  There is a large oversupply of fleet across the bulk carriers, and there is no indication that the fleet is going to shrink anytime soon.  Precisely the opposite.  I have looked at SB and I am unsure the dividend is safe.  As you mention there may be further stock dilution as well.  I keep a place holder on SB, and Genc (small number of shares).
Title: Re: ATCO - Atlas Corp
Post by: menlo on June 08, 2011, 08:53:42 AM
Hmmmm....

Stock price down 30% from the high, while a leasing index is up. 

http://www.bloomberg.com/apps/quote?ticker=CTEX2500:IND (http://www.bloomberg.com/apps/quote?ticker=CTEX2500:IND)
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 08, 2011, 09:02:17 AM
Looks like we've hit that 5% yield that I didn't think we'd ever see.
Title: Re: ATCO - Atlas Corp
Post by: JEast on June 08, 2011, 09:34:04 AM
I believe the Contex index is just for 2-year leases and is not really applicable to SSW.

After the recent run up to $21 we took some off the table (not all), but have been buying those sold shares back today below $15.


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: finetrader on June 08, 2011, 10:06:24 AM
Which benchmark, index or comparable, do you use then ?

I found this site but i'm not a subscriber

MODIFY: I forgot the link:
http://www.lloydslist.com/ll/sector/containers/
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 08, 2011, 10:18:59 AM
Which benchmark, index or comparable, do you use then ?
When looking at Seaspan, I use this one:

http://www.seaspancorp.com/fleet-list.php

Daily charter rates for all ships, plus the timeline on their contracts.

The impact of the drop in spot rates on Seaspan is that new contracts negotiated today may be need to be more competitively priced.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 09, 2011, 06:47:28 AM
Looks like we have a deal:

http://www.reuters.com/article/2011/06/09/yangzijiang-contracts-idUSL3E7H91AJ20110609

$100mm for 10k TEU ships is really impressive.  The last pricing was $165mm for 13k TEU vessels and $125mm for 8.5k TEU vessels (2007).

Now I'd like to learn about the contracts with the liners.  That will probably come soon now that this news has broken.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on June 09, 2011, 06:52:31 AM
Do you think people are confusing Seaspan for other shippers? People are waking up to the fact that dry bulk and oil tankers are doomed. Seems to have been hit pretty hard..
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 09, 2011, 07:24:06 AM
Do you think people are confusing Seaspan for other shippers? People are waking up to the fact that dry bulk and oil tankers are doomed. Seems to have been hit pretty hard..

I don't think the Seaspan model is very well understood, generally.  They exist somewhere between a REIT and a ship finance company.  It's weird.  Well as they say, if you're the only operator in a particular business, you're either very smart or very stupid.

All sectors of shipping are exposed to the same business cycle.  Demand grows, rates rise, everyone profits, everyone orders new vessels, supply swells, rates drop, everyone loses tons of money.  Wash, rinse, repeat.

Right now, tankers and dry bulk are in the worst phase of their business cycle.  Containers recently came out of a downturn, but they're struggling to reach escape velocity.  The financing restrictions, drop in trade volume, and influx of ship supply have made for some pretty nasty economics.  It's only because containerized shipping is growing so quickly that we're anywhere near profitability.  If it weren't for the popularity of the global supply chain, we'd be in a much worse position.

I'm keeping an eye on tankers.  Some people from the Yahoo board have mentioned NNA as a potential SSW / GSL story to play out in a couple years.  They're more into product tankers (vs. dirty tankers), so it's a niche offering.  After I look, I'll give some thoughts here.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on June 09, 2011, 07:31:25 AM
I plan to buy leaps on OSG and FRO, and perhaps NAT at some point. I want to reproduce that Pabrai trade though with leaps. I have been watching for a year or so and owned OSG and OSP for a while in 2007 or so. Its part of why I am anti new ships lol. I think Tankers when they hit bottom will be a great sector to get into. Old ships will be scrapped and a bottom will be reached at some point. Just not sure when....
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 09, 2011, 07:38:03 AM
One thing that tankers' economics have going for them is the shift in oil use from the US to developing countries.  Today's oil flow networks are partially designed around how to feed the US as efficiently as possible.  As demand hikes in other countries, the flow will be less efficient, which means your effective supply of tankers reduces and your prices go up.  I'm not sure what the actual impact is, but it's gotta be worth something...
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on June 09, 2011, 12:00:08 PM
Very interested in hearing the particulars from SSW , contract terms and with who, amount and terms of credit,
news certainly hasn't generated a positive reaction
Title: Re: ATCO - Atlas Corp
Post by: txlaw on June 09, 2011, 12:06:14 PM
I plan to buy leaps on OSG and FRO, and perhaps NAT at some point. I want to reproduce that Pabrai trade though with leaps. I have been watching for a year or so and owned OSG and OSP for a while in 2007 or so. Its part of why I am anti new ships lol. I think Tankers when they hit bottom will be a great sector to get into. Old ships will be scrapped and a bottom will be reached at some point. Just not sure when....

Very interesting, Myth.  I've been following OSG and FRO as well.

I don't understand the business well enough, though, to make any decisions.  Any suggestions on where to begin doing research (other than company info)?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on June 09, 2011, 12:26:20 PM
I was looking for why SSW has been dropping.  Now we know.  The market is figuring the stock will get diluted and the dividend pushed off. 

RE: OSG - they have an awesome website for preliminary research on the industry. 
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 09, 2011, 12:49:32 PM
I was looking for why SSW has been dropping.  Now we know.  The market is figuring the stock will get diluted and the dividend pushed off. 
They have enough cash and debt capacity today the fund the whole deal.  Maybe the belief is that they are buying these vessels on speculation, as there's no press release yet.  The news seems to have leaked out of the ship builder prematurely.  I can't find mention of this on the Yangzijiang or Seaspan websites.
Title: Re: ATCO - Atlas Corp
Post by: txlaw on June 09, 2011, 01:05:42 PM
RE: OSG - they have an awesome website for preliminary research on the industry. 

Thanks, Uccmal.
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on June 09, 2011, 01:39:53 PM
I plan to buy leaps on OSG and FRO, and perhaps NAT at some point. I want to reproduce that Pabrai trade though with leaps. I have been watching for a year or so and owned OSG and OSP for a while in 2007 or so. Its part of why I am anti new ships lol. I think Tankers when they hit bottom will be a great sector to get into. Old ships will be scrapped and a bottom will be reached at some point. Just not sure when....

Very interesting, Myth.  I've been following OSG and FRO as well.

I don't understand the business well enough, though, to make any decisions.  Any suggestions on where to begin doing research (other than company info)?

Honestly TX you dont need to know more then what Val posted. It mirrors Pabrai's write up in The Dhando Investor and my experience. The next leg will be increased scrapping and really low rates. At some point things turn and its to the moon again. Everyone then gets excited and orders new ships and .......

I have picked up most of my info from OSG investor days and conference call. They are in all the major crude related markets and even in US Flag which is an interesting business. The only caveat is discount their bullishness and never pay any attention to steel value. OSG was trading at a cash flow yield of 25% (it was insanely high) and was buying back every share in sight because it was at a discount to steel value, that proved to be a mistake. If they had paid off debt, they would be sitting pretty.

Cash flow is negative, now we just need that capitualation moment. Not sure when it will happen or if its already happen.
Title: Re: ATCO - Atlas Corp
Post by: prunes on June 09, 2011, 08:48:35 PM
I find it hard to evaluate shipping. Pabrai advocated buying companies that were actually producing income.. not so with most shipping companies these days. And it strikes me as imprudent for a leveraged company with negative earnings to be paying dividends based on its lending facility.

One company's point of view: ‘Shipping recovery not before 2013' - http://articles.economictimes.indiatimes.com/2011-05-30/news/29598858_1_charter-rates-freight-rates-trade-growth

And here is the Chairman of Frontline, John Fredriksen, predicting a "collapse" of the tanker market within the next year or two - http://www.bloomberg.com/news/2011-06-06/frontline-billionaire-fredriksen-bets-tankers-collapsing-freight-markets.html

I think it is interesting to see how much buying OSG has had recently though. What other shipping companies are experiencing insider buying? One poster on seekingalpha indicated that Fredriksen had recently acquired a large block of TRMD although I can't verify that personally. He is quoted denying this rumor in this article - http://www.reuters.com/article/2011/03/16/torm-frontline-idUSLDE72F0L220110316
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on June 09, 2011, 09:52:52 PM
I think one can take someone too literally.

http://greenbackd.com/2010/06/04/pabrai-on-frontline-ltd-usa-nysefro-hawk-template/

In this case you would be buying for the turn, the issue is you have to get the turn right. Early can be the same as being wrong. I have been watching since 2009 or so and am still watching, not sure what I am looking for but I know which ones I will buy, just not sure when.

---


We had a 55% return on the Frontline investment and an annualized rate of return of 273%. Frontline is a good example of why I am hesitant to share ideas because we will see this again. Oil tanker rates will go down and at the last meeting a bunch of investors told me, “We are watching now.” The more people that are tuned in, once it gets to $8 or $9, the more the buying – reducing our gains. But that is an example of a Special Situation investment in a company with negative cash flow.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 10, 2011, 05:02:02 AM
And it strikes me as imprudent for a leveraged company with negative earnings to be paying dividends based on its lending facility.
Prunes,

Are you referring to Seaspan here?
Title: Re: ATCO - Atlas Corp
Post by: prunes on June 10, 2011, 07:47:42 AM
I had been referring to OSG.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 10, 2011, 07:57:03 AM
I had been referring to OSG.
Ok, good.  Otherwise you'd be exposed to a tirade regarding the general misunderstanding of Seaspan's derivative instruments, their function, how they are accounted for, and how they are perceived by the market.  The whole topic makes my blood boil! :)
Title: Re: ATCO - Atlas Corp
Post by: prunes on June 10, 2011, 10:44:02 AM
Few questions about SSW...

1) Have any of you seriously considered the risk posed by the introduction of new lease accounting rules in 2013. This is a hot issue in the real estate industry right now. Per the 20-F:

Quote
Our ability to grow may be reduced by the introduction of new accounting rules for leasing.

International and U.S. accounting standard-setting organizations have proposed the elimination of operating leases. The proposals are expected to be finalized in 2011 and implemented in 2013 or later. If the proposals are enacted, they would have the effect of bringing most off- balance sheet leases onto a lessee’s balance sheet as liabilities. This proposed change could affect our customers and potential customers and may cause them to breach certain financial covenants. This may make them less likely to enter into time charters for our containerships, which could reduce our growth opportunities.

2) How are long-term charter rates typically determined relative to spot rates at the time of the contract being written? What kind of risk reasonably exists for those charters currently operating on 1-year lease options? It seems like SSW is getting a good rate on its new ships being delivered in 2011 - 2012. Were these rates negotiated before the bottom fell out of the market, or do the charterers simply realize that it is a matter of time until prices firm up?

3) What drove SSW to $21 in April and what is driving it back down--correlation with the broader market and general pessimism related to the global economy and trade?

4) Why is SSW unique in this market niche? I think I saw this question being kicked around here but didn't see a great answer.

5) Depreciation in 1Q was $30 MM on cash for distribution of $80 MM. Is this a reasonable estimate of fleet maintenance capex? Management expects cash for distribution to grow about 50% by 2013. Where do you guys expect dividends to be at that time?
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 10, 2011, 12:04:11 PM
Prunes, I don't have all of the answers here, but these are my thoughts on your questions:

Few questions about SSW...

1) Have any of you seriously considered the risk posed by the introduction of new lease accounting rules in 2013. This is a hot issue in the real estate industry right now. Per the 20-F:


I haven't seriously considered this risk.  I'm not sure how much this mitigates it, but loan covenants aren't bound by whatever the accounting rules du jour are.  For example, debt covenants could be adjusted to exclude leases as part of the asset/liability consideration.  Correct me if I'm wrong, but in the case of a financing lease aren't both the asset and the liability moved to the balance sheet?  This should dull the liability impact on ratio-based covenants.


2) How are long-term charter rates typically determined relative to spot rates at the time of the contract being written? What kind of risk reasonably exists for those charters currently operating on 1-year lease options? It seems like SSW is getting a good rate on its new ships being delivered in 2011 - 2012. Were these rates negotiated before the bottom fell out of the market, or do the charterers simply realize that it is a matter of time until prices firm up?

The rates are set similarly to how you'd set the rates on any contract.  It's a combination of underlying cost, value add, time horizon, risk, and overall commitment.  There's an inherent dampening effect on SSW's rates - for shipping bonanzas, the underlying costs are high and so high operating rates don't result in enormous profits.  For periods where there is a supply overhang, such as now, the cost components are much lower but the expectation is that long-term rates will also be lower.

Rechartering risk is important.  So far, all options by charterers have been exercised.  SSW's contracts have something like a 1 year lead time on most/all contracts when it comes to these options not being exercised.  The same principles apply to setting rates on new charters / recharters.  Rechartering is where operational excellence becomes a competitive advantage.

3) What drove SSW to $21 in April and what is driving it back down--correlation with the broader market and general pessimism related to the global economy and trade?
General market irrationality?  I don't know why prices move as much as they do.  Seaspan carries a lot of debt, so its price gyrations in the market could be amplified.  The thing is, you could go back in time to 2008 and predict within 5% what Seaspan would earn every quarter for the next 12 quarters based on the information they gave then.  They've executed very well on a long term plan.  So, I fail to comprehend what drives the price up by 50% and then down by 30% over 4-5 months.


4) Why is SSW unique in this market niche? I think I saw this question being kicked around here but didn't see a great answer.
I don't really know how to answer this because I'm not sure what you're looking for.  Maybe scale is the right answer.

5) Depreciation in 1Q was $30 MM on cash for distribution of $80 MM. Is this a reasonable estimate of fleet maintenance capex? Management expects cash for distribution to grow about 50% by 2013. Where do you guys expect dividends to be at that time?
Fleet maintenance is a tough question.  I've tried to answer it a few times but I can't come up with a satisfactory answer.  It's a challenging question because container ships are illiquid assets that trade in opaque markets and whose intrinsic values depend on things like how well they were maintained and what the going rate for charters is.  If trade picks up and container ships are in demand, SSW will get a nice little NAV bump in the price. 

Depreciation on the book value is probably not a good proxy for this metric.

I hate revealing my guesses regarding the dividend.  I've guessed unsuccessfully for two years straight.  But whatever, I'm getting used to being wrong.  I think they'll bump it up to $1/year in 2011Q3.  There are 5 large vessels coming online over the next 3 months, so this is a good time to do this.  The next bump could come in 2012Q1 or Q2 when the finish of the current "five year plan".  There should be a nice, steady income stream for the rest of 2012 while we wait for the new 10k TEU vessels to come online.
Title: Re: ATCO - Atlas Corp
Post by: prunes on June 10, 2011, 12:23:14 PM
Thanks.. my question #4 was asking, why do other shipping companies tend to stick to the spot markets where they get killed? Why aren't other companies doing long term leases?

Regarding #1 - Many companies prefer to lease real estate as opposed to own it because it makes their financial metrics look better. Some large real estate users have said that this new accounting treatment could alter their rent/buy decisions.

I don't currently have a position but I'm hoping the shares drop enough amid increasing gloom about the economy to pick them up at $10. *Fingers crossed*

--

How much stock do you put in SSW's book value? Many shipping companies took write downs on their assets but I don't think SSW did.

I had tried, just for fun (I have a sick notion of fun), to back into SSW's carrying value for its ships based on its guidance of what a ship costs per TEU. I assumed straight-line depreciation (15 year useful life; I had seen somewhere that most ships become uneconomic to operate past this point) and a cost of $0.013 MM / TEU. My depreciated cost was $2.7 B compared to PP&E on their books of $4.2 B. The one big missing piece to my analysis that I don't know the answer to though is that SSW's cost guidance is based on a 6,200 TEU ship and most of SSW's ships are smaller than this and therefore would have a higher $/TEU to construct... I just can't make any guess as to how much.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on June 10, 2011, 02:20:20 PM
Thanks.. my question #4 was asking, why do other shipping companies tend to stick to the spot markets where they get killed? Why aren't other companies doing long term leases?
To tease this apart a bit better, Seaspan's customers are the liners.  The liners are exposed to the spot market because their customers are the shippers.  Shippers, like Wal-Mart, are dependent on customer demand to drive shipping volume, so their interests aren't aligned with long-term contracts.  Liners usually end up making huge profits and huge losses because of this.  You could argue that SSW puts liners at a disadvantage with its long term contracts, but contracting with SSW vs. buying your own vessel present the same economic conundrum around investing in equipment.

Regarding #1 - Many companies prefer to lease real estate as opposed to own it because it makes their financial metrics look better. Some large real estate users have said that this new accounting treatment could alter their rent/buy decisions.
Understood - this is more a factor of "how much" as well as how big a deal this is to SSW customers.  It's difficult to forecast, so it's probably something worth keeping in mind.

I don't currently have a position but I'm hoping the shares drop enough amid increasing gloom about the economy to pick them up at $10. *Fingers crossed*
If it drops to $10 I'll liquidate everything else and go all in :P

How much stock do you put in SSW's book value? Many shipping companies took write downs on their assets but I don't think SSW did.

I had tried, just for fun (I have a sick notion of fun), to back into SSW's carrying value for its ships based on its guidance of what a ship costs per TEU. I assumed straight-line depreciation (15 year useful life; I had seen somewhere that most ships become uneconomic to operate past this point) and a cost of $0.013 MM / TEU. My depreciated cost was $2.7 B compared to PP&E on their books of $4.2 B. The one big missing piece to my analysis that I don't know the answer to though is that SSW's cost guidance is based on a 6,200 TEU ship and most of SSW's ships are smaller than this and therefore would have a higher $/TEU to construct... I just can't make any guess as to how much.
Not a lot.  I look more at the contracts as the measure of intrinsic value.  A few things you'll want to adjust:
 - 15 years is probably conservative.  SSW has 4 vessels in its fleet that are 22 years old and appear to be renewing for APMM.  The operating expenses are about 30% higher than newer, comparable vessels.
 - Don't forget about scrap value or second-hand sale value.
 - You can dig through the press releases to get all of the historical costs for the ships.  It's $175mm for 13.1k TEU and $125mm for 8.5k TEU.  The more recent vessels are $100mm for 10k TEU.

I consider the NAV to be a price swing amplifier.  In good times, they'll drive the price up, but in bad times they'll drag it down.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on June 10, 2011, 03:56:29 PM
Probably being too basic here, but not building ships on spec, and only with long term liner contract in hand sets SSW apart, also the bunker costs are the liners responsibility
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on June 10, 2011, 03:58:04 PM
Well the first 13 K ship has been delivered, absolutely no mention of the new contract in the press release tho


HONG KONG, CHINA -- (MARKET WIRE) -- 06/10/11 -- Seaspan Corporation (NYSE: SSW) announced today that it accepted delivery of its first 13,100 TEU containership, the COSCO Glory. The new containership, which was constructed by Hyundai Heavy Industries Co., Ltd., is Seaspan's sixth delivery in 2011 and expands the Company's operating fleet to 61 vessels.

The COSCO Glory is on charter to COSCO Container Lines Co., Ltd. ("COSCON") under a twelve-year, fixed-rate time charter. The ship is the eleventh of a total of eighteen vessels to be chartered by Seaspan to COSCON.

Gerry Wang, Chief Executive Officer, Co-Chairman and Co-Founder of Seaspan, commented, "We are pleased to achieve this latest milestone, as we take delivery the first of eight 13100 TEU vessels. The COSCO Glory is the largest vessel in our fleet and a flagship vessel in the COSCON containership fleet. We look forward to taking delivery of the remaining seven vessels in this class and further strengthening our deep relationship with COSCON."
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on June 10, 2011, 05:00:20 PM
It's very clear that the market doesn't understand SSS very well.  It's trading at a dividend of 5% and they are adding continuous capacity that is working immediately out of the yard.  Fine by me.  I just keep slowly getting more shares on the downturns.  A.
Title: Re: ATCO - Atlas Corp
Post by: prunes on June 10, 2011, 10:27:21 PM
Somewhat off topic:

Diana Shipping (DSX) did a spin off at the beginning of the year of its containership business, Diana Containership (DCIX). Simply put, it was a very unattractive spinoff for most shareholders.

-Market cap at the time of spinoff was around $91 MM
-Distribution ratio of 1:30.7
-DCIX's assets were comprised of cash and two containerships
-DCIX also kicks management fees of around $1.3 MM back to DSX

To make matters worse, DCIX did a secondary IPO this past week, selling 14 MM shares (on 6 MM outstanding) at $7.50. Shares now trade at $7.15. Concurrently, DCIX did a $20 MM private placement of 2.67 MM shares to DSX.

Interestingly, the CEO, Director and President, EVP and Secretary, CFO and Treasurer, collectively agreed to purchase 1.625 MM shares at the IPO price (link (http://www.sec.gov/Archives/edgar/data/1481241/000095012311058045/y91187fwfwp.htm)). (That there is promise in the spinoff is also demonstrated by DSX's participation in the above private placement.)

More info - http://dollarwisefl.wordpress.com/2011/01/16/diana-containerships-dcix-a-spin-off-with-the-right-kind-of-problems/

More more info - http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/44106

Investor presentation - http://www.sec.gov/Archives/edgar/data/1481241/000091957411000115/d1162153_ex99-1.htm
Title: Re: ATCO - Atlas Corp
Post by: vinod1 on June 11, 2011, 06:13:10 PM
I do not have much experience with Seaspan and wanted to check if my understanding is correct via a simple conceptual model of how this company works. I always think in terms of owner earnings and am trying to visualize Seaspan's owner earnings instead of the distributable cash flow management seems to focus upon.

Assuming a simple model of Seaspan consisting of only a single ship for charter purchased with $100 in total financed with debt/equity of 75/25.

Equity          $25
Debt            $75 (Long term debt is about 55% with about 20% in other long term liability)
---------------------
Assets        $100


Revenue              $10 (~10% of assets)
Op-Expenses       $3   (~30% of revenue)
Interest Ex           $3.5 (Assuming about 6% interest on LTD with other financed at low cost)

Earnings before D&A     $3.5

If we assume that a new ship is needed after 30 years and that a new ship costs increases at about inflation + 1% or about 3x the original price. Since that ship is also financed at 25% equity we need to provide for only that amount. In addition we need to pay off the debt at the end of 30 years.

$300 for new ship ($75 equity) + $75 to pay off old loan = $150 needed after 30 years
Scarp value of ship = 10% of initial cost and grows with inflation ~ $20 after 30 years

Total Outlay needed to replace with a new ship and with a new loan. Essentially start the cycle over again. This is about $130.

If you put about a $1 each year for 30 years in a lock box that grows at about 8%, this gives you the $130 needed to replace ship. Thus $1 is your maintainance Capex. I selected 8% because the $1 is in reality invested by Seaspan and earns about its ROIC.

Thus, Owner's earnings are $2.5 or earning about 10% ROE.

If the above is totally nuts, please let me know! I much rather be wrong than lose capital on an investment I do not understand.

Thanks

Vinod

Title: Re: ATCO - Atlas Corp
Post by: vinod1 on June 11, 2011, 06:51:10 PM
I know there are lots of assumptions and simplifications involved but the depreciation expense is fairly robust at about 1%, +/- 30 bps for a fairly wide range of assumptions on the replacement costs of the ship.

Vinod
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on June 12, 2011, 06:49:00 AM
Vinod, that makes sense to me.  I would probably use 25 years for ship life.  Capex probably rises at a certain point.  This can easily be balanced in your equation by raising the vault to 1.10 per year or so.  It's all in the realm of error. 

When you look at SSWs income statements and clean out the noise from the incoming ships, and the derivative fluctuations, it is a remarkably consistent model.  Now hopefully, it doesn't turn out to be a fraud  ::)
Title: Re: ATCO - Atlas Corp
Post by: vinod1 on June 13, 2011, 08:17:25 AM
Vinod, that makes sense to me.  I would probably use 25 years for ship life.  Capex probably rises at a certain point.  This can easily be balanced in your equation by raising the vault to 1.10 per year or so.  It's all in the realm of error. 

When you look at SSWs income statements and clean out the noise from the incoming ships, and the derivative fluctuations, it is a remarkably consistent model.  Now hopefully, it doesn't turn out to be a fraud  ::)

Thanks!
Title: Re: ATCO - Atlas Corp
Post by: JEast on June 22, 2011, 06:00:35 PM
No official announcement for SSW, but noticed the following analyst comments that a deal with Hanjin Shipping for several of the newly contracted TEU-10.000 newbuildings and showing some interest in 18,000-teu vessels.

http://www.glgroup.com/News/Seaspan-aiming-for-another-giant-containership-order-54464.html (http://www.glgroup.com/News/Seaspan-aiming-for-another-giant-containership-order-54464.html)

Recent company presentation:
http://files.shareholder.com/downloads/SSW/1096615012x0x476891/42ac0ab5-5ac0-43ed-b657-2a5a8c10e17a/Presentation%20-%2016-June-2011%20for%20DB%20Conference.pdf (http://files.shareholder.com/downloads/SSW/1096615012x0x476891/42ac0ab5-5ac0-43ed-b657-2a5a8c10e17a/Presentation%20-%2016-June-2011%20for%20DB%20Conference.pdf)


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: libor.plus1 on June 29, 2011, 09:14:01 AM
I read the ABC Funds write-up on these guys. Can someone shine some light as to why their dividends have slipped? and how are they able to support their dividend without NI or FCF?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on June 29, 2011, 10:20:51 AM
libor.plus, I wish I had one of those Eidetic memories. 

You probably need to read the most recent AR to get a good feel.  Irwin is a little out of date on his summaries.  He bought the IPO incidentally. 

The dividend was reduced when the financial crisis hit.  They ran into trouble getting financing for the newbuilds and had to conserve cash.

To get a good feel for SSW you need to mentally split it up into the continuing operations and the newbuild, because the newbuild is so significant relative to continuing operations.  The continuing operations are profitable and produce cash. 
Title: Re: ATCO - Atlas Corp
Post by: Myth465 on August 01, 2011, 09:31:40 AM
Growth just because isnt looking too bright....

http://www.bloomberg.com/news/2011-07-27/container-vessel-rates-plunge-signaling-slowdown-in-u-s-freight-markets.html
Title: Re: ATCO - Atlas Corp
Post by: JEast on August 01, 2011, 09:51:37 AM
On a recent trip to Europe, I spoke to an individual well connected in the shipping industry.  However his expertise was more in the bulker business.  Nevertheless and in essence, his comments were that the KGs out of Germany have been in trouble and will stay in trouble.  In addition, European banks have been strong-armed to keep sour shipping loans on the books until 2013.  These loans will or should start clearing probably late next year.  Until then there will be more shakeout in the industry.

On the other hand, even with dire opinion back in the marketplace this individual was quite bullish in the ship purchase market.  Maybe Fairfax is seeing the same thing as well as Seaspan.  I would not worry too much about headline charter rates, as these are always short-term rates of 6-24 month averages and not the 72-120 month charters Seaspan has and will enter into.

As a value investor, one must recognize that shipping is a volatile and a cyclical business.  As such, I took some off the top after the significant run up in Seaspan earlier this year, but am back in at recent prices.


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on August 23, 2011, 09:04:53 AM
Cosco’s arrogance could be catching
Monday 22 August 2011, 17:24 FINANCEBack to Lloyd's List Asia
THE announcement by Cosco that it is unilaterally reneging on its chartering commitments sends a terrible message to the shipping industry.It has been widely known that Cosco was seeking...  (full article not available to me)
 
 Be nice to have some info/clarification from SSW  on this news  from Cosco, if true , not good for SSW  and its shareholders
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on August 23, 2011, 01:45:04 PM
 Looks like it is Cosco bulk shipping that is having charter disputes , could find nothing on container ship charters,

even at low spot rates of $1525/feu HK to LA and bunker costs looks like Cosco would make $7 mil/ trip on a full ship, maybe not their best op margin , but wouldnt think they would disrupt charters at that level
Title: Re: ATCO - Atlas Corp
Post by: finetrader on August 24, 2011, 07:09:32 AM
http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/financial-times/cosco-warned-of-worldwide-ship-seizures/article2139851/

Title: Re: ATCO - Atlas Corp
Post by: gaf63 on August 26, 2011, 11:13:21 AM
COSCO settles charter disputes, and it was apparently it was only in the bulk charters

http://www.joc.com/container-lines/cosco-loses-432-million-settles-charter-disputes
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on August 27, 2011, 05:18:21 AM
The bulk business isn't doing to well. 

FYI, I recall Cosco trying to pull the same stunt in early 2009 with Seaspan and Gerry told them to take a hike.  Since then they have signed more charters so I think they fall into the valuable but difficult customer category. 
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on August 29, 2011, 02:23:52 PM
Interesting, I recall CSAV, and Maersk trying to pull out of their contracts, but no remembrance of Cosco
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on August 31, 2011, 05:26:02 PM
Gaf, you may be right.  Cant recall the situation very well.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 01, 2011, 04:40:52 AM
Ssw earnings out.  Another consistently good quarter. 

http://finance.yahoo.com/q?d=t&s=SSW

Should bump the stock up a little.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on November 01, 2011, 06:15:03 AM
Ssw earnings out.  Another consistently good quarter. 

http://finance.yahoo.com/q?d=t&s=SSW

Should bump the stock up a little.

I agree with your assessment on the quarter but I think the stock is going to get punished today.  The MSC transactions are great solutions to the 25-year-old vessel problem, but they're recording  a loss which doesn't look good.  The interest rate hedges "look bad" on paper, too.  And there was no dividend bump for this quarter.  Not that they said they would increase it every 6 months, but it was on my list of hopefuls and others' too.

The business continues to perform very well.  If it gets around $12 then I will pick up some more, despite the overweight in my portfolio.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 01, 2011, 07:51:55 AM
Agreed Val9000.  My position size is about 10%.  Would bump it to 15 if the price got down to 12 or so.  Not expecting that but you never know.  Last years div. Increase was 50%.  Expect something along similar lines in the next q or two.  As always, wont hold my breath if it doesn't happen on my schedule. 
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on November 01, 2011, 07:58:39 AM
Agreed Val9000.  My position size is about 10%.  Would bump it to 15 if the price got down to 12 or so.  Not expecting that but you never know.  Last years div. Increase was 50%.  Expect something along similar lines in the next q or two.  As always, wont hold my breath if it doesn't happen on my schedule.

I'm listening to the earnings call right now.  Sai (CFO) said that they will probably examine this on an annual basis going forward.  My interpretation is that we'll probably see a dividend bump in six months.

We should see another deal in place by the end of the year.  I recall something about the Carlyle Group JV requiring Seaspan to pick up a minimum 50% of all vessels ordered through their JV, evaluated annually.  The first order they took on 3 of 7 vessels, so they need to order at least 1 more by end of year.
Title: Re: ATCO - Atlas Corp
Post by: JEast on November 02, 2011, 07:47:36 PM
Much like Fairfax of day past, every time a company’s management is proactive and does something to improve the balance sheet for the longer term, either the market ignores it or punishes the equity.  Another case in point as Seaspan has been quite nimble over the last 3 years coming up innovative ways with and managing the balance sheet.

With these recent moves to remove their (4) oldest ships from the fleet before the charters expire is quite beneficial.  One, it removes the uncertainty in a tough re-charter market, and two, it frees up some capital for new builds that are surely coming.  Of course, the downside is reduced revenue upfront which I assume the market is looking at currently.

Though well known by now, this call was interesting in the fact all, or most, of the European shipping banks have or will be pulling in their capital.  This bodes will for the ones that do have capital to buy bigger and more fuel-efficient ships. 

This is not a 10-bagger, but seems like a safe income producing equity for RRSP or a US IRA.  Of note for taxable accounts, roughly 80% of the income received is treated as return of capital for US investors.


Cheers
JEast

Disclosure: Full position again
Title: Re: ATCO - Atlas Corp
Post by: bathtime on November 30, 2011, 02:29:26 PM
I haven't owned SSW before, but I know it's a favorite here. Is it cheap at these prices or does the micro macro uncertainty make it risky to own with its exposure to shipping? Thanks!
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 30, 2011, 05:39:16 PM
Bathtime, its cheap.  Cheap as it has ever been relative to safety.  It seems To trade off of shipping rates but that is not relevant to its earnings.  It operates as a REIT, more or less- one of a kind.

Suggest you review the posts and the link to posts from the past message board, and read the financials, before investing.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 13, 2011, 06:36:21 AM
Well it was cheap.  Still cheap according to the SSW managers and board:

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=632786


Title: Re: ATCO - Atlas Corp
Post by: Santayana on December 13, 2011, 06:50:10 AM
Can anyone explain how tender offers work?   If they are buying at $15, why would the price spike to $14 this morning, and then fall back into the 12s?
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 13, 2011, 08:22:55 AM
Well it was cheap.  Still cheap according to the SSW managers and board:

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=632786

They also announced this, which is interesting:
http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=632783

Quote
Seaspan Corporation (NYSE: SSW) today announced that it has entered into a binding memorandum of understanding to acquire Seaspan Management Services Limited (the "Manager") in a stock-based transaction valued at $54 million

This could open the door to non-financing revenue streams for SSW.  Thinking of the Carlyle agreement, SSW will finance, operate, and charter roughly half of the vessels taken on by the Carlyle vehicle.  The other half, while financed and chartered externally, will still require operations.  The obvious candidate for running these ops is SSW, but they will need to change their model to support this.  They will require a method of selling and servicing operations and this purchase gives them that method.

Gerry Wang, CEO, is leaving Seaspan in about a year.  Gerry is credited with putting together the deals that fueled Seaspan's growth.  The growth-oriented CEO is out and the operations-oriented business is in.  Thinking out loud...  this could be a transition back to the high dividend/MLPish structure from a few years ago.


Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 13, 2011, 08:50:31 AM
Can anyone explain how tender offers work?   If they are buying at $15, why would the price spike to $14 this morning, and then fall back into the 12s?

No idea... But it looks like an arbitrage opportunity to me.  If I can scare up some cash to buy some shares to tender that would be nice.  They are reducing the share count by around 15%.  So the dividend will be less in total, spread among fewer shares.

As per your comments Val, it looks as though the big growth phase is over, which should leave alot of cash for dividends.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on December 13, 2011, 09:34:02 AM
Just yesterday the FT had  a full page on the woes of the shipping industry, values of ships declining and banks calling in loans, foreclosures of more cos., etc., so this was great news this morning
Will bring the fully diluted share count to the mid 80 millions after purchase of the mng. co. , and halve their cash on hand , which tells me they are not worried about the financing of the last 3 ships in 2012(hopefully a correct assumption).

Trading in SSW this morning is perplexing after this news tho
Title: Re: ATCO - Atlas Corp
Post by: alertmeipp on December 13, 2011, 09:48:56 AM
lousy way to spend cash IMO.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 13, 2011, 09:52:26 AM
I can't explain the price fluctuations, but the only sensible guesses I could come up with are:
 - The tender offer of $15 will only apply to 10mm shares, so there is risk that you won't get this price if you bought today, hence it wouldn't hover at $15.
 - It could be that after a price decline of $20 to $10.xx a lot of people had limit sells between $11 and $14, which would have been triggered this morning.
 - Some people could just be exiting after getting in over the past few weeks at < $11.  Good trade.

Title: Re: ATCO - Atlas Corp
Post by: manualofideas on December 13, 2011, 10:52:13 AM
It seems less than optimal that the company would pay $15 per share.  They could probably buy back shares for a lot less if they just spread out the buyback over a few months. 

We wonder if there is a back-story to this.  Could it be that one of the large shareholders margined their stake and now needs to meet margin calls.  A short-term pop would greatly alleviate any pressure from margin calls even if such a pop is not optional for the company over the long term. 

It would be good to understand the real reasons behind this seemingly unnecessary tender at a huge premium to market.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 13, 2011, 10:59:35 AM
It seems less than optimal that the company would pay $15 per share.  They could probably buy back shares for a lot less if they just spread out the buyback over a few months. 

We wonder if there is a back-story to this.  Could it be that one of the large shareholders margined their stake and now needs to meet margin calls.  A short-term pop would greatly alleviate any pressure from margin calls even if such a pop is not optional for the company over the long term. 

It would be good to understand the real reasons behind this seemingly unnecessary tender at a huge premium to market.

It could have to do with the $54mm stock buy-out of the management firm that they also announced.  $54mm in $10 shares is more costly than $54mm in $15 shares.

Not sure that's enough to do it, though.

I agree that it's an odd way to approach a buy-back.  Does anyone have other examples of buy-backs that are similarly structured?
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 13, 2011, 11:13:04 AM
It seems less than optimal that the company would pay $15 per share.  They could probably buy back shares for a lot less if they just spread out the buyback over a few months. 

We wonder if there is a back-story to this.  Could it be that one of the large shareholders margined their stake and now needs to meet margin calls.  A short-term pop would greatly alleviate any pressure from margin calls even if such a pop is not optional for the company over the long term. 

It would be good to understand the real reasons behind this seemingly unnecessary tender at a huge premium to market.

I saw a decent explanation for the tender offer on the Yahoo board:

Quote
Look at average daily volume for the last 3m. It is 270,000 so if they want to buy 10,000,000 shares without affecting the price that much they need to buy about 10-20% of the daily volume each day. So to buy 10m shares they will need entire year of daily buying (I the mean time they have to pay dividends on these shares). It is much easier, faster and might be actually cheaper just to buy them in one block.
Title: Re: ATCO - Atlas Corp
Post by: Santayana on December 13, 2011, 11:42:12 AM
I can't explain the price fluctuations, but the only sensible guesses I could come up with are:
 - The tender offer of $15 will only apply to 10mm shares, so there is risk that you won't get this price if you bought today, hence it wouldn't hover at $15.
 - It could be that after a price decline of $20 to $10.xx a lot of people had limit sells between $11 and $14, which would have been triggered this morning.
 - Some people could just be exiting after getting in over the past few weeks at < $11.  Good trade.



Will be interesting to see how it trades over the next few days.    If they announce another div raise this spring, $15 might seem pretty cheap.  I'm glad I added to my position last week instead of waiting any longer.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on December 13, 2011, 01:59:56 PM
I can't explain the price fluctuations, but the only sensible guesses I could come up with are:
 - The tender offer of $15 will only apply to 10mm shares, so there is risk that you won't get this price if you bought today, hence it wouldn't hover at $15.
 - It could be that after a price decline of $20 to $10.xx a lot of people had limit sells between $11 and $14, which would have been triggered this morning.
 - Some people could just be exiting after getting in over the past few weeks at < $11.  Good trade.



Will be interesting to see how it trades over the next few days.    If they announce another div raise this spring, $15 might seem pretty cheap.  I'm glad I added to my position last week instead of waiting any longer.

Seems cheap now.
If they get the tender of 10M and cancel those shares you'll have the current dividend pouring over a smaller share count.
I have no plans to tender though ... but I sure there are lots of traders who would.

I think it's cheap at $15 especially with a bump in dividend/share assuming those shares are cancelled.
Title: Re: ATCO - Atlas Corp
Post by: finetrader on December 13, 2011, 04:18:58 PM
the float is 50m shares. So if Seaspan buy 10m shares you can expect that you will be able to sell 20% of your shares at 15$.

The premium is 43.5% over the december 12 2011 closing price , so you can expect a gain of 0.20*0.47%=9.4%

So the arbitrage price is about 10.45$*1.094=11.43$  , add another premium for the awareness of the market that management think that the 10.45$ was too low and this will get you to today's closing price of 12.16$.



Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 13, 2011, 07:18:18 PM
the float is 50m shares. So if Seaspan buy 10m shares you can expect that you will be able to sell 20% of your shares at 15$.

The premium is 43.5% over the december 12 2011 closing price , so you can expect a gain of 0.20*0.47%=9.4%

So the arbitrage price is about 10.45$*1.094=11.43$  , add another premium for the awareness of the market that management think that the 10.45$ was too low and this will get you to today's closing price of 12.16$.


Brilliant!
Title: Re: ATCO - Atlas Corp
Post by: alertmeipp on December 13, 2011, 07:38:53 PM
so 150m spent to buy 10m shares .... and mark to market loss of above 30m right after all said and done, brilliant.
pps will probably drift downward soon after.. why not just a normal bid issue.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 14, 2011, 06:27:33 AM
so 150m spent to buy 10m shares .... and mark to market loss of above 30m right after all said and done, brilliant.
pps will probably drift downward soon after.. why not just a normal bid issue.

I was referring to finetrader's working out of the stock price, not SSW buying shares back at $15.

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 14, 2011, 06:44:43 AM
Volume yesterday was about 3.8 million.  I am wondering if sellers were just trying to take advantage of the rise to get rid of some stock and buyers were looking at it from the arb. perspective.

Volume today is tiny, so far. 

I dont really care either way.  My target is above $20 subject to adjustment as more info arrives.
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 15, 2011, 08:34:17 AM
Given the length of the SSW thread I wonder why nobody has mentioned GSL as an investment opportunity. Are there any specifics reasons?
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 15, 2011, 09:51:18 AM
http://www.thestreet.com/video/11345196/2012-shipping-biz-looks-strong-says-seaspan-ceo.html#1327695626001
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on December 15, 2011, 11:33:41 AM
The main risk with GSL is their customers are ZIM and CGM (both highly levered shipping firms) and these firms have high default risk and the ship leasing businesses is for the most part a ship financing business.  Costamere is another ship leasor with a more stable customer base but sells at a premium to Seaspan.

Packer
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 15, 2011, 11:55:25 AM
The main risk with GSL is their customers are ZIM and CGM (both highly levered shipping firms) and these firms have high default risk and the ship leasing businesses is for the most part a ship financing business.  Costamere is another ship leasor with a more stable customer base but sells at a premium to Seaspan.

Packer

Customer concentration has been mentioned as an issue, but when a whole sector is under distress, sometimes concentration is better than diversification if you go with the strongest. Zim is very small client, it is mostly about CMA CGM.

CMA CGM was one of the few profitable companies last year, does not have an unmanageable newbuild program, and raised substantial capital (500M+) in the middle of the crisis. It also has sport assets to support that debt. It is is probably the strongest of the bunch (better than Maersk) and is not playing hardball as COSCO (They own subordinated shares of GSL).

Not that I do not like SSW, just trying to assess the relative risks.
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 15, 2011, 02:01:53 PM
Go to page 10 for a comparison of CMA CGM's orderbook against others.

http://files.shareholder.com/downloads/ABEA-4IHSNP/1567788382x0x498151/d1ccb093-e8bc-412c-aa64-927cdc7396b6/GSL%20September%202011%20Presentation%20FINAL.pdf
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on December 15, 2011, 03:46:28 PM
The one thing that did cause me to pause was CMA CGM's credit rating of CCC+ and current bond prices in the 40s.  Seaspan in contrast had all A to AAA clients.

Packer
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 15, 2011, 03:49:15 PM
The one thing that did cause me to pause was CMA CGM's credit rating of CCC+ and current bond prices in the 40s.  Seaspan in contrast had all A to AAA clients.

Packer

Very interesting Packer. Not sure why the discrepancy in their ratings considering the others large orderbooks while losing money. And it is not like the other are not levered.
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on December 15, 2011, 03:55:12 PM
I am not sure how the CMA CGM "earnings" are calculated but I have a tendency to trust the bond market as an indicator of defualt risk and when I bought SSW it was as cheap as GSL.  Right now SSW is more expensive but still cheap when compared to Costamere and other leasing fimrs such as GATX

Packer
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 16, 2011, 08:36:19 AM
I am not sure how the CMA CGM "earnings" are calculated but I have a tendency to trust the bond market as an indicator of defualt risk and when I bought SSW it was as cheap as GSL.  Right now SSW is more expensive but still cheap when compared to Costamere and other leasing fimrs such as GATX

Packer

The bond market sometimes can be wrong, specially these days for a European company. The current CMA CGM bond price is worse than in 2009 when CMA CGM was raising capital, his build program was twice as today, had short term maturities, and was losing money.

CMA CGM refi'd out of their '12/'13 unsecureds into '17/'19's and raised $500M from Yildrim for a 20% stake. There were several PE firms willing to buy it in those dark times but Saade (CMA CGM CEO) battled them out. Even the French government offered to infuse capital.

COSCO probably has a worse balance sheet and larger newbuild program than CMA CGM. Also operationally CMA CGM has been the leader in forging alliances (colluding) in their main routes to "stabilize" prices.

My main worry is GSL's LTV covenant (not sure how SSW is handling this) that has been waived a couple of times but can be a real pain in case of a real crisis.
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 16, 2011, 08:44:37 AM
Some links on CMA CGM current situation:

http://www.cma-cgm.com/AboutUs/PressRoom/Press-Release_CMA-CGM-First-Half-2011-Results_11607.aspx
http://www.cma-cgm.com/AboutUs/PressRoom/Press-Release_Nine-Month-2011-Revenue-and-Earnings_12087.aspx

"At 30 September, the Group’s cash position remained amply positive, at $763 million, with all of the year’s capital expenditure already committed."

"At a time of market overcapacity and high oil prices, for the first nine months consolidated EBITDA remained positive at $672 million and the Group reported a net profit of $13.2 million."

|the Group has decided to deploy a vigorous action plan to reduce full-year costs by $400 million, which will deliver its full impact in 2012."

"In addition, CMA CGM has announced the creation of a leading partnership with MSC, the world's second largest container shipping group. The operating agreement, which concerns the Asia-Northern Europe, Asia-Southern Africa and South American trades, is designed to substantially improve the Group’s performance and generate major operating synergies."
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 16, 2011, 01:26:51 PM
My main worry is GSL's LTV covenant (not sure how SSW is handling this) that has been waived a couple of times but can be a real pain in case of a real crisis.

Easy.  SSW doesn't have LTV covenants on its debt.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 16, 2011, 05:30:44 PM
ABC Funds has updated their write-up on their Seaspan position:
http://www.valueinvestigator.com/en/valuefavourites/ssw.php#update

The most interesting tidbit to me was that they have no intention of tendering their shares.
Title: Re: ATCO - Atlas Corp
Post by: PlanMaestro on December 16, 2011, 05:41:01 PM
Easy.  SSW doesn't have LTV covenants on its debt.

That is a good reason :)
Title: Re: ATCO - Atlas Corp
Post by: ERICOPOLY on December 19, 2011, 11:01:17 PM
Regarding this tender offer, the $15 per share number seems oddly similar to the conversion price from that dilutive capital raise a couple of years back.

Second, they have 2 ships to be delivered this February and another 2 in April.  After that, no more ships for roughly 2 more years.

So regarding this progressive dividend policy, where they stated that they will raise the dividend as ships are delivered...  I take it they will raise the dividend in the next 6 months but then not again for two more years.  So it might be a big dividend raise.

I'm long SSW but I did so by writing the Feb $15 put.
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on January 12, 2012, 08:53:47 AM
21.3 million shares were tendered and SSW will buy 11.3 mil of them, approx. 53%,
so about half of shares offered will be purchased and the rest returned by Jan. 19

http://finance.yahoo.com/news/Seaspan-Announces-Preliminary-iw-1392777767.html?x=0
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on January 12, 2012, 09:44:15 AM
two questions I still have;

a) has the company confirmed that the repurchased shares will be cancelled?
b) if those shares are cancelled I wonder if the same dividend pool will be spread over the remaining shares? Looks like about $.90/share or so.

<IV
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on January 12, 2012, 09:52:54 AM
Judging from the timing, it looks like half will be canceled and the other half will be put towards the acquisition of the ship manager.

I think we'll see a small div increase for 2011Q4 tied to the lower share count, and we'll see another (guessing larger) increase at the end of 2012Q1 tied to the new vessels on the water and the implied annual revision of the dividend policy.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 18, 2012, 07:38:15 AM
Interesting reaction of the stock price.  Starting to look like a good move by SSW.  I tendered 1/3 of my position, expect 1/6 to go through.  I bought the same number of shares a week or two earlier at about 13.30.  Wish I had had more cash available but then whats new.
Title: Re: ATCO - Atlas Corp
Post by: shalab on January 21, 2012, 09:28:39 AM
SSW shot up after the tender - expect it to go down once some of the tendered shares come back to market?
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on February 03, 2012, 02:30:39 PM
Have been wondering when they would get to announcing the div.  ,

They kept it the same , no raise,  Their phrase "sustainable" is trumping their " progressive"


Seaspan Declares Dividend of $0.1875 Per Common Share for Fourth Quarter 2011


HONG KONG, CHINA -- (MARKET WIRE) -- 02/03/12 -- Seaspan Corporation (NYSE: SSW) announced today that the Company's Board of Directors has declared a quarterly dividend of $0.1875 per common share for the three months ended December 31, 2011. The dividend will be paid on February 22, 2012 to all shareholders of record as of February 13, 2012.

Title: Re: ATCO - Atlas Corp
Post by: Santayana on February 22, 2012, 12:17:27 PM
Big price move on big volume in the past hour.   Wonder if some information got leaked about next quarter's dividend.   It was 1st quarter last year that they raised from .12 to .19 causing a big run up.
Title: Re: ATCO - Atlas Corp
Post by: JEast on February 22, 2012, 12:27:24 PM
If you are a US shareholder, don't worry about an increase in the dividend as it will all go to pay the increased taxes.  That is - if the new proposed budget is accepted to triple the dividend tax :)

http://online.wsj.com/article/SB10001424052970204880404577225493025537660.html?mod=WSJ_hp_LEFTTopStories (http://online.wsj.com/article/SB10001424052970204880404577225493025537660.html?mod=WSJ_hp_LEFTTopStories)

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: Santayana on February 22, 2012, 12:31:56 PM
Holding in the tax deferred account, so hopefully I won't feel all the pain!
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on February 22, 2012, 01:22:32 PM
Seems kind of strange.
Title: Re: ATCO - Atlas Corp
Post by: Santayana on February 23, 2012, 08:30:12 AM
More of the same today.   I was hoping to get a chance to buy some more under $15, but for now it looks like the train has left the station.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on February 23, 2012, 09:19:44 AM
I cant figure this out.  Searched the news and there seems to be nothing.  Maybe it was added to an index in Asia or some such.  Trimmed a tiny bit today - still a 10% position.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on February 23, 2012, 09:20:41 AM
Only a value investor wants to know why his stock goes up in value....
Title: Re: ATCO - Atlas Corp
Post by: Santayana on February 29, 2012, 03:38:34 PM
2011 results are out and there's that dividend increase.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=652954

Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 09, 2012, 06:14:24 PM
Heads up for US shareholders:  doing my taxes and found out that SSW has restated their divs. as non div. distributions for income allocations.  So the divs. are not qualified divs as in years before and the tax due will be at ordinary income rates in taxable accounts.  Would think they would have contacted shareholders of this change.  Hopefully I dont end up with an underpayment penalty.  Scottrade is looking into this tax treatment and I have an email in to SSW inv. relations.
Title: Re: ATCO - Atlas Corp
Post by: JEast on March 09, 2012, 06:38:34 PM
This year the dividend was treated as 100% return of capital for US shareholders which reduces your cost basis.  This also implies that US recipients pay no taxes until the shares are sold, if a gain.

http://seaspancorp.com/dividend-distributions.php (http://seaspancorp.com/dividend-distributions.php)

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 10, 2012, 12:14:56 PM
Thanks for posting that info JEast, news to me.  Did SSW provide any info, press release, as to this change of div. treatment?   GAF
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on March 10, 2012, 12:41:23 PM
In looking at the div. info on SSW's site I see that there has been a return of capital in most years.  Until 2011 all my
SSW shares were held in IRA accounts  so my brokerage never reported the divs as qualified or not, and I was unaware of  the div. treatment.  The IRS will get paid one way or the other tho, just delayed, G
Title: Re: ATCO - Atlas Corp
Post by: Santayana on May 18, 2012, 10:54:21 AM
SSW dropped to $14.20 this morning.  I wasn't able to move fast enough to load up at that price, but still added a bunch under $15.  Anyone else still holding/following this? 
Title: Re: ATCO - Atlas Corp
Post by: JEast on May 18, 2012, 11:25:12 AM
The shareholder base in the shipping sector are quite strange.  To paraphrase Buffett from this year's meeting, 'Shipping stockholders are psychotic drunks.'  One minute SSW is up, then it is down though they have 10 year contracts that have not changed yesterday, today, or tomorrow.  Not my favorite kind of stock, but take the opportunity when it is given.  Load up below $14, sell at $20 then rinse and repeat :)

Recent progress continues with the current earnings release.  Plenty of capital to buy depressed assets in the next 6-12 months.


Cheers
JEast

Disclosure: Long SSW
Title: Re: ATCO - Atlas Corp
Post by: Santayana on May 18, 2012, 11:40:11 AM
LOL, love that quote from Buffett!     Today's range has been $14.20-$15.96 on basically no news.  Yes they reported yesterday, but nothing that should have surprised anyone.  I sold some at $17.50 a couple of weeks ago, but felt I had to jump back in this morning.
Title: Re: ATCO - Atlas Corp
Post by: JEast on May 24, 2012, 07:56:55 AM
For the folks that own shipping companies, found this article on the acceleration of tonnage being scrapped is progressing in 2012.  Would not have predicted that, but the bunker costs are destroying inefficient ships and bodes well for larger and newer designs.

http://www.cnshipping.com/en/home/shippingnews/25602.shtml (http://www.cnshipping.com/en/home/shippingnews/25602.shtml)


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on June 13, 2012, 04:25:03 AM
An interesting article on the state of the container shipping market.

http://www.economist.com/node/21556632

Packer
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 31, 2012, 06:01:00 PM
3 Q earnings are out.

They retired a significant amount of common shares.

Distributable cash is increasing steadily.

No dividend increase this Q - I am guessing 20% increase next Q.

Still trading with > 6% dividend yld. 

Boring.

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 31, 2012, 06:06:46 PM
http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=717330

Bv around 17.
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on November 01, 2012, 07:09:37 AM
I have spent the past 5 years deeply enmeshed with the container space.

Another container stock that I like, and have a sizeable position in, is Global Ship Lease (GSL).  It has a somewhat complicated story, but leases its vessels on long-term charter like Seaspan.  It has a single counterparty, CMA CGM, which is the third largest container liner in the world.  CMA CGM owns 45% of GSL, and I believe, for many reasons which I can elaborate on, is a safe counterparty whose interests are aligned with GSL's.

The company came public via SPAC and its chairman, who organized the SPAC, is Michael Gross (formerly of Apollo Management, and currently chair of Solar Capital and Solar Senior). 

Currently, GSL is being forced to amortize its debt with all excess cash.  Right now it generates ~$60M of cash flow from ops annually compared to a market cap of  $157M.  There are $48M of prefs out (held by CMA CGM) and $459M of debt.  The company has an LTV test in November, which I do not expect it to pass.  The LTV should be extended for 6-12 more months.

I believe a dividend will be resumed either mid 2013 or end of 2013.

The container market itself is currently facing demand slack and supply issues, but I expect those to abate in 2014 and beyond.  Much of the tonnage delivered in the past two years was ordered in 2008-2009 (it takes about 3 years to deliver a vessel).  If global demand picks up (container demand growth is generally 2x GDP growth), we could quickly see a shortage in the space.  Aside from that, however, the industry had excess supply from 2000-2007 and was able to earn good profits by laying up ships and creating artificial supply constraints.  Maersk, the industry leader, has recently taken the lead in reducing capacity (having pulled 20% of Asia-Europe capacity) and has shifted the dialog to rational competition from price wars which dominated 2011 and bled the industry dry.
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on November 01, 2012, 07:25:56 AM
One other comment I'll make, is that you have to pay attention to the fleet re-rate profile for these container ship owners. There are some, like Diana Container (DCIX) that look appealing at first glance, until you realize they purchased ships above market in order to get a temporary above market day rate. When these ships re-rate in a year or two, the cash flow will implode (the dividend yield suggests that it's illusory).  Conversely, there are others like GSL and SSW whose majority of leases are long-lived.
Title: Re: ATCO - Atlas Corp
Post by: JEast on November 01, 2012, 08:16:25 AM
My 2¢ is that GSL is one of a more speculative wager but they have surely been on the radar for the last 5 years too.  I liked the proposition below the $1.50 range, otherwise in the too hard pile with such a smaller TEU asset profile with limited competitive advantages.  This unlike SSW that has one of the few competitive advantages in the business with financial flexibility, multiple Asian relationships, and their own hull design going forward.  The container space (unlike drybulk, etc) is one of cash flow, dividends, and moderate growth (the old GATX model).  Yes, the re-rate profiles are very important and reason one needs the 10-12 year leases.

In all, GSL and DAC have compelling asymmetric investment opportunities at much lower prices.

Cheers
JEast

Disclosure: Very Long SSW
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on November 01, 2012, 09:40:35 AM
I continue to believe that the valuation on GSL is compelling, and believe the shares are worth twice their current price. That said, SSW clearly has more financial flexibility, and its valuation premium (justifiably) reflects that.

The larger ship size is important for efficiency as you point out, but as Gerry Wang said on the SSW call, the panamax class isn't going away.  They are still effective on north-south, feeder and smaller trade lanes such as intra-Asia.  The post-panamax/Ultras need deeper ports, etc. and are particularly effective on Asia-Europe and Asia-US.
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on November 01, 2012, 10:01:00 AM
Good BCG piece on the state of the container shipping industry and what needs to change: https://www.bcgperspectives.com/Images/BCG_Charting_a_New_Course_Oct_2012_tcm80-118384.pdf
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on December 06, 2012, 06:13:11 AM
SSW taking on additional financing - looks to be in connection with a new vessel purchase / long term charter arrangement:
http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=725017

Gerry Wang is also in talks to extend employment as CEO beyond Jan 1 2013 to sometime in 2015.  That's good, because he's barely done anything for the past 2 years and was paid quite handsomely.  Balancing that critique I will say that this is lack of activity is attributed more to the condition of the container ship market than for Gerry's lack of effort.
Title: Re: ATCO - Atlas Corp
Post by: JEast on December 06, 2012, 06:48:57 AM
Per the recent prospectus, they are looking to add four (4) new vessels with the same, assumed major liner.  Two vessels of 10K TEU, and two of 4,600TEU.  Of the potential 10kTEU vessels, they will be of a fuel efficient internal Seaspan design.  Would expect more details in 1st quarter 2013 and with potential deliveries of the 10kTEU in 2014.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on December 06, 2012, 07:21:15 AM
...I will say that this is lack of activity is attributed more to the condition of the container ship market than for Gerry's lack of effort.

Agree.  Better to do nothing, when there is nothing to do.  Financing has been difficult, and it's a testament to Gerry that they are finding ways to secure vessels in this environment.  I have no position in SSW, but think SSW is in a good position to take advantage of current industry conditions...
Title: Re: ATCO - Atlas Corp
Post by: JEast on December 06, 2012, 04:55:37 PM
The preferred 'D' was priced at 7.95% today and 0.5% better than this analyst expected.  A little surprised at only $67 million though (another $10 for over allotment) as I would suspect that they still have enough remaining on there banking lines.  Or the preferred 'D' will only be used for the (2) 4,600TEU vessels.  If so, quite attractive at estimated $80 million.

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=725493 (http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=725493)

One additional tidbit on value investing though in reference to lack of activity from above, "A value investor is actually working the hardest when he/she appears to be doing nothing."

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 07, 2012, 02:34:23 AM
The recent rise was due to SSW being put back on the marginable securities list.  The morning this occurred I added 1000 shares which then went up in value by 1.50.  Luck favours the prepared mind!
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on December 07, 2012, 09:47:24 AM
"A value investor is actually working the hardest when he/she appears to be doing nothing."


Great quote
Title: Re: ATCO - Atlas Corp
Post by: rjstc on December 07, 2012, 10:30:41 AM
This I would normally put in the books section, but since it pertains to shipping I thought I'd add it here. Dynasty's of the Sea, a new book about some biggies in the shipping business.
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on December 07, 2012, 12:28:04 PM
Excellent -- I also recommend "The Box" and "Maritime Economics" for anyone interested in this space
Title: Re: ATCO - Atlas Corp
Post by: rjstc on December 07, 2012, 01:25:35 PM
Thanks for the book ideas
Title: Re: ATCO - Atlas Corp
Post by: gaf63 on December 14, 2012, 01:45:55 PM
Anyone interested in buying the D series pfd., they are trading over the counter  with symbol of SSWPF
Traded today from 24.9 to 25
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on January 02, 2013, 04:06:55 AM
New 8A12B/A form. Are they thinking of taking it private?

http://ir.seaspancorp.com/secfiling.cfm?filingID=1193125-12-516334 (http://ir.seaspancorp.com/secfiling.cfm?filingID=1193125-12-516334)
Quote
The description and terms of the Rights are now set forth in the Amended and Restated Rights Agreement, as amended by Amendment No. 1 and Amendment No. 2. Amendment No. 2:

• eliminates certain existing exclusions from the calculation of the beneficial ownership percentages of Excluded Persons (as defined in the Amended and Restated Rights Agreement), which exclusions apply to (a) Series A preferred shares (“ Series A ”) and related securities issued or to be issued to Excluded Persons in connection with the Corporation’s 2009 financing and (b) Common Shares issued or to be issued to certain Excluded Persons in connection with the Corporation’s January 2012 acquisition of Seaspan Management Services Limited;
 
• adds a new exclusion from the calculation of the beneficial ownership percentages of Excluded Persons for any Common Shares acquired by the Excluded Persons following January 1, 2013 pursuant to their participation in the Corporation’s dividend reinvestment plan with respect to any cash dividends paid on the Common Shares or Series A through and for the quarter ending March 31, 2015; and

• increases the aggregate beneficial ownership percentage general trigger for Excluded Persons under the Amended and Restated Rights Agreement from 30% to 70%.

In connection with the Amendment No. 2, members of the Washington Family have agreed with the Corporation that they will participate in the Corporation’s dividend reinvestment plan with respect to any cash dividends paid on the Corporation’s Common Shares or Series A through and for the quarter ending March 31, 2015, which participation will reduce the amount of cash otherwise distributable to shareholders by the Corporation.
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on January 02, 2013, 10:09:02 AM
No position here, but thought you guys might be interested in this: http://www.lloydslist.com/ll/sector/containers/article414317.ece
Title: Re: ATCO - Atlas Corp
Post by: JEast on January 04, 2013, 06:41:57 AM
Update on the previous comments by management.  Looks like they have a new major liner to join the team with Yang Ming Marine of South Korea.  Five (5) new 14k TEU vessels on 10-year contracts with option for 5 more.

http://www.reuters.com/article/2013/01/04/yangming-seaspan-idUSL4N0A91LU20130104?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43 (http://www.reuters.com/article/2013/01/04/yangming-seaspan-idUSL4N0A91LU20130104?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43)

The company has stated their plan, stuck to the plan, and has executed the plan wonderfully over the last five years.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on January 04, 2013, 06:53:47 AM
Update on the previous comments by management.  Looks like they have a new major liner to join the team with Yang Ming Marine of South Korea.  Five (5) new 14k TEU vessels on 10-year contracts with option for 5 more.

http://www.reuters.com/article/2013/01/04/yangming-seaspan-idUSL4N0A91LU20130104?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43 (http://www.reuters.com/article/2013/01/04/yangming-seaspan-idUSL4N0A91LU20130104?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43)

The company has stated their plan, stuck to the plan, and has executed the plan wonderfully over the last five years.

Cheers
JEast
Hi, actually, Yang Ming is from Taiwan and my understanding is owned by Taiwanese government. I think the ships probably will be built by a South Korean ship yard.
Title: Re: ATCO - Atlas Corp
Post by: JEast on January 04, 2013, 07:43:54 AM
Thanks for the correction zippy1 on my fat fingers as the ships are rumored to be built in South Korea and Yang Ming Marine is indeed Taipei based.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on January 04, 2013, 01:38:45 PM
JEast,

          It should be me thanking you for this idea that works out so beautifully.

           Zippy...
Title: Re: ATCO - Atlas Corp
Post by: JEast on January 15, 2013, 07:09:18 PM
Another report on the recent rumor of five (5) new ships to be chartered by Yang Ming Marine and built by South Korea's Hyundai Heavy Industries.  At $120m each for the 14k TEU ships, the cheapest purchase price I recall in sometime for container vessels.

http://www.reuters.com/article/2013/01/16/hyundaiheavy-seaspan-order-idUSL4N0AL0C120130116?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43 (http://www.reuters.com/article/2013/01/16/hyundaiheavy-seaspan-order-idUSL4N0AL0C120130116?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43)

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: JEast on January 23, 2013, 05:53:30 AM
SSW goes on a spending spree.  Eight (8) more ships, four new construction and 4 second hand containerships.

http://finance.yahoo.com/news/seaspan-signs-newbuilding-contracts-fuel-133000748.html (http://finance.yahoo.com/news/seaspan-signs-newbuilding-contracts-fuel-133000748.html)

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 29, 2013, 04:54:09 PM
Hey Jeast,

Another article... Probably says the same thing:
http://www.bloomberg.com/news/2013-01-29/seaspan-may-buy-15-more-ships-as-prices-hit-4-year-low.html

I need to spend some time catching up on this one when the 10 k comes out.  I have sort of ignored it and just collected the dividends for the last year.
Title: Re: ATCO - Atlas Corp
Post by: JEast on January 30, 2013, 02:03:34 PM
As a foreign equity, they file a 20-F on EDGAR and in the past they have filed around the end of March.

These guys continue to surprise.  If I only knew the management better and the supporting cast back in 2008-09 I would have gone much bigger than I did.  Even after the run-up and all those dividends paid, the company is in better shape today than since the IPO.  Look for an increased dividend in the May, or sooner.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on March 06, 2013, 04:54:30 AM
Yearend result out. Up dividend by 25%.
Quote
In March 2013, Seaspan's board of directors approved a 25.0% increase in the quarterly common share dividend to $0.3125 per share, which dividend will be subsequently declared for the quarter ending March 31, 2013. This $0.0625 per share increase to Seaspan's quarterly common share dividend represents the fourth increase since March 31, 2010 for an aggregate increase of 212.5%. Seaspan expects common share dividends for the four quarters ending December 31, 2013 to total $1.25 per share.

http://seekingalpha.com/news-article/5842701-seaspan-reports-financial-results-for-the-quarter-and-year-ended-december-31-2012?source=email_portfolio&ifp=0 (http://seekingalpha.com/news-article/5842701-seaspan-reports-financial-results-for-the-quarter-and-year-ended-december-31-2012?source=email_portfolio&ifp=0)
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 06, 2013, 05:05:39 AM
Thanks Zippy.

As a foreign equity, they file a 20-F on EDGAR and in the past they have filed around the end of March.

These guys continue to surprise.  If I only knew the management better and the supporting cast back in 2008-09 I would have gone much bigger than I did.  Even after the run-up and all those dividends paid, the company is in better shape today than since the IPO.  Look for an increased dividend in the May, or sooner.

Cheers
JEast

Yeah well, me too.  Hindsight is 20/20.  Irwin Michael must be thrilled.  He has held since the IPO.
Title: Re: ATCO - Atlas Corp
Post by: Phaceliacapital on March 06, 2013, 05:46:05 AM
Thoughts on Diana shipping (US) and CMB (belgium)?

Haven't gone through the thread here but think it's an interesting business so will try to read up.
Title: Re: ATCO - Atlas Corp
Post by: LC on March 06, 2013, 06:28:08 AM
Thoughts on Diana shipping (US) and CMB (belgium)?

Haven't gone through the thread here but think it's an interesting business so will try to read up.

I looked at Diana shipping before...the numbers are good but there are so many cheap shipping companies out there that I want to do a more comparative analysis. There are two Greek shipping companies (Danaos Corp, Navios Maritime) that I am looking at side-by-side. They're just so cheap I feel they deserve some analysis.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 06, 2013, 07:19:27 AM
I have looked at several and none has the same model as SSW. 

None is remotely as well run. 

Diana, Overseas SH, Genco, and a few others.  All are totally dependent on spot rates. 

SSW is more like a REIT. 

Title: Re: ATCO - Atlas Corp
Post by: Packer16 on March 06, 2013, 07:40:18 AM
The other LT leasors are Rickmar's Maritime, GSL, Danos and Costemare.  Due to the LT leases they are more like REITs than spot rate senstive shippers.

Packer
Title: Re: ATCO - Atlas Corp
Post by: Phaceliacapital on March 06, 2013, 01:13:12 PM
How many details are in this thread?

Or do you have other good material for a quick catch up?

I find so many interesting ideas nowadays help me :D
Title: Re: ATCO - Atlas Corp
Post by: tengen on March 07, 2013, 02:24:53 PM
Yeah well, me too.  Hindsight is 20/20.  Irwin Michael must be thrilled.  He has held since the IPO.

IPO price was $21 so maybe not too thrilled unless he averaged down when the stock was trading below $10.
Title: Re: ATCO - Atlas Corp
Post by: JEast on March 07, 2013, 06:30:52 PM
not too thrilled  --  not so fast.  The devil is always in the details as they say.  As for the IPO of SSW, one should recognize that over $8 has been returned to shareholders as return of capital implying that your IPO cost basis is $13 and now yielding over 11% on your investment.  Give management and Irwin Michael their due.  :)

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on March 07, 2013, 07:28:23 PM
These guys are definitely best positioned in what I see is most attractive segment of shipping, in this part of the cycle.  Their access to capital will benefit them greatly.  That said, I still only hold GSL.
Title: Re: ATCO - Atlas Corp
Post by: tengen on March 07, 2013, 09:36:23 PM
Give management and Irwin Michael their due.  :)

I stand corrected!
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 11, 2013, 04:49:06 AM
Gerry is the Prem Watsa of the shipping industry.  But up ships during downturns so your strong during the upturn.  They check credit worthiness of their customers over the long term.  Buy back shares when they are cheap. 

http://seekingalpha.com/article/1251251-seaspan-corporation-ceo-discusses-q4-2012-results-earnings-call-transcript?page=6&p=qanda&l=last
Title: Re: ATCO - Atlas Corp
Post by: tripleoptician on October 10, 2013, 12:58:33 PM
What happened here? On my watch list from almost a year ago and now down almost 20% in a few days after news of Common share dilution and convertible notes offering for corporate purposes. Haven't followed for a while so is there a perception of a change to Seaspan's business model with this offering?

Thanks in advance
Title: Re: ATCO - Atlas Corp
Post by: JEast on October 10, 2013, 04:56:21 PM
Quote
What happened here?
The market has been trained over the years to recognize, then react, that a share offering is a sign of weakness.  On occasion, a share offering is in the best interest of the company.  Take for example an insurance company after a major catastrophe.  Would it be wise of the company to raise capital to go write more policies?  A big yes for some companies.  Is it wise to raise capital to go buy very cheap, brand new, ships to lease under 6-12 year contractual agreements?  I think yes presently as your bankers will be happy, you suppliers will be happy, your counter parities will be happy, and in time the shareholders will be happy.

But then again, if the market really, really hates it -- you punt.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: no_free_lunch on October 10, 2013, 06:47:49 PM
Quote
Seaspan Corporation (NYSE:SSW) announced today that it will no longer proceed with its previously announced public offerings of common shares and convertible notes as it would not be in the best interests of our shareholders.

http://www.4-traders.com/SEASPAN-CORPORATION-14483/news/Seaspan-Corporation--Seaspan-Announces-Termination-of-Public-Offerings-of-Common-Shares-and-Convert-17342189/


Damn!  Stock is back up to $23 after hours.  Too bad, I was thinking this would have been a good entry.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 11, 2013, 06:14:14 AM
I had been selling some into the rally.  Then I was buying down to 19.61 yesterday. 

I guess I'll be selling into today.  I am guessing that Gerry has decided to find a better way to finance the new boats. 

It looked like he wanted to try to get cheaper financing than the Preferreds.
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on October 11, 2013, 06:34:09 AM
I had been selling some into the rally.  Then I was buying down to 19.61 yesterday. 

I guess I'll be selling into today.  I am guessing that Gerry has decided to find a better way to finance the new boats. 

It looked like he wanted to try to get cheaper financing than the Preferreds.

Good for them.  I love to see management teams act rationally.  I've watched secondaries where management crams down the offering, regardless of price just to do their expansion plans.  Wang et. al didn't do that.  Says something about them.  I have no position.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on October 11, 2013, 06:46:35 AM
I've had my doubts about SSW lately.  I sold my entire position about a month ago.  It was an excellent return all in, but I think the business model is flawed.  A couple years ago the only model was "long term charter", I now see the following breakout:
 - 71 operating vessels
 - 3 vessels no charter
 - 5 vessels < 3 year charter (plus options)
 - 4 vessels bareboat / 5 years

From 0% to 15% dilution of the model..  but the really concerning thing for me is that I haven't seen a single long-term recharter of any vessels.  All vessels that have come off of a long term charter have been redeployed in short term capacity.

I'm sure many vessels will get taken up on longer charters once there is an under-supply situation, but meanwhile SSW is left holding the bag.  The long term charters are set at mid-cycle rates, so SSW will miss the cyclical shipping boom but will be left chartering/day rating during bust cycles.  This will result in an earnings drag.

One other thing that is concerning to me.  SSW tends to negotiate initial contracts and charters during shipping booms (not always, but mostly because of when their customers are willing to enter into long term charters).  This means they are paying top dollar for the vessel, but are chartering out at generally competitive rates because the charters are so long.  This is a different type of earnings drag because the cost of the vessel is fixed and usually ordered in boom times but the charters are variable and not always negotiated in boom times.
Title: Re: ATCO - Atlas Corp
Post by: JEast on October 11, 2013, 07:05:27 AM
Quote
I think the business model is flawed
Maybe the business model was never understood.  There has never been a plan to recharter 10-12 year old ships to another 10-12 year charter.  No major liner wants to lock themselves into a 10 year contract with an old asset, too expensive on the bunker costs.  Would you want to lease a 10 year old truck/car for another 10 years? 

The plan has always been to attempt to recharter those ships coming off long-term charters for another 3-4 years, then sell them. Rinse and repeat.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on October 11, 2013, 07:31:21 AM
Quote
I think the business model is flawed
Maybe the business model was never understood.  There has never been a plan to recharter 10-12 year old ships to another 10-12 year charter.  No major liner wants to lock themselves into a 10 year contract with an old asset, too expensive on the bunker costs.  Would you want to lease a 10 year old truck/car for another 10 years? 

The plan has always been to attempt to recharter those ships coming off long-term charters for another 3-4 years, then sell them. Rinse and repeat.

Cheers
JEast

Okay that makes more sense.  Not sure where that's ever been spelled out on earnings calls or in the shareholder materials.  All I ever hear about is "long term charters" and "financial strength".  Never anything about rolling over the fleet, although they do talk about having a young fleet.

It's weird to me that there would be no interest in 10 year charters on 10 year old boats, but there would be sufficient interest in buying 10 year old boats.  Or is SSW waiting until boom times to sell out their older vessels?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 11, 2013, 07:35:13 AM
Val,

SSW was a small company in the shipping business until more recently.  As such they didn't have the leverage with the shipping yards.  They are now able to buy vessels more strategically.

Over all, They have done a fantastic job so far.  I see no reason they wont continue to do well. I expect the dividend will be raised another 25 cents per share in the new year.

I first bought the stock 4 years ago.  Over that time I have come to respect the Washingtons and Gerry Wang, more and more.  They are the best managed company in the shipping industry, bar none. 

This cancellation of the offering only demonstrates to me the ability of management to adapt and change with conditions, and learn from their mistakes. 

SSW is my largest common stock position.

Edit:  Wang reminds me of Buffett.  He is trying to lower the debt cost, buy vessels when they are cheapest, and keep the cash flow positive and coming through the door.
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on November 20, 2013, 06:08:00 AM
To sell common stock.
Quote
HONG KONG, CHINA--(Marketwired - Nov 20, 2013) -  Seaspan Corporation ("Seaspan") (SSW) announced today that it has priced its previously announced public offering of 3,500,000 Class A common shares (the "Common Shares") at $22.00 per share. Seaspan has granted the underwriters of the offering a 30-day option to purchase up to an additional 525,000 Common Shares. The offering is expected to close on November 25, 2013.
http://finance.yahoo.com/news/seaspan-announces-pricing-3-500-133335813.html
Title: Re: ATCO - Atlas Corp
Post by: LongTerm on November 20, 2013, 07:30:09 AM
Interesting wording in the announcement, "previously announced public offering". Wasn't the prior offering cancelled as a result of the market reaction to the prior announcement? Did I miss something? I consider management quite savvy but today's announcement has me scratching my head. Shares are down 10% today in reaction to this new announcement on over 10x normal volume. I have to conclude that management is either looking at some fabulous shipbuilding deals or??? I'm not quite sure what.  In fact I'm a bit surprised that the underwriters even agreed to this new offering and the offering price given what happened last time. Anyone else find this strange?
Title: Re: ATCO - Atlas Corp
Post by: MYDemaray on November 20, 2013, 09:12:12 PM
I do find this strange.  Thought they were acting rationally before by pulling the offering.  By reference, GSL CEO said they were seeing "mid to high teen unlevered IRRs" in used tonnage. No idea about newbuilds.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 21, 2013, 04:17:12 AM
I too am scratching my head.  I am guessing they need the money for newbuilds.  I will give them the benefit of the doubt. The stock was off 10% on a 5% dilution.  I took the opportunity to buy some more shares at a 6% dividend yield. 
Title: Re: ATCO - Atlas Corp
Post by: JEast on November 21, 2013, 05:18:42 AM
Two points:  First, they must have some strong interest from the brokers to come back so soon after the earlier attempt, and second, I would not characterize the float as a total dilution as the capital will be adding strength and future returns to existing share owners as referenced in my earlier 10/10/13 comment.

Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 21, 2013, 06:27:59 AM
Two points:  First, they must have some strong interest from the brokers to come back so soon after the earlier attempt, and second, I would not characterize the float as a total dilution as the capital will be adding strength and future returns to existing share owners as referenced in my earlier 10/10/13 comment.

Cheers
JEast

Seems like it.  The stock is tightly held.  The volume yesterday was around 5 million, with 3.5 million shares hitting the market, and a bit of churn.  No argument regarding the dilution.  I was just noting that the stock went down more than the immediate dilution factor. 
Title: Re: ATCO - Atlas Corp
Post by: no_free_lunch on April 03, 2014, 06:25:42 PM
Found this writeup/history on Seapan.  It is an investment thesis, written originally in 2006 and then updated over the past 7 years.   With the various updates you get a nice history of seaspan before, during and after the GFC.   Definitely worth a read.  Thanks to writser for posting the link.

http://www.valueinvestigator.com/en/valuefavourites/ssw.php
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 02, 2014, 06:30:41 AM
First quarter earnings were released this week. 

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=843195

Nothing unusual.  In the conference call they explained the lower than usual dividend increase - only 10% - being due to building capital to pay for the big new builds. 

Still my largest common stock holding.  I would make it my entire portfolio if I could but that would be dumb.  5.5 years and holding.

Title: Re: ATCO - Atlas Corp
Post by: xtreeq on June 19, 2014, 12:55:26 AM
The P3 Network is rejected by China
http://online.wsj.com/articles/shipping-alliance-blocked-by-china-1403001240
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 13, 2014, 01:47:21 PM
Big time sale for those who like big fat growing dividends. 

My guessing is it is selling off in sympathy with oil, and China even though the business is mostly immune to these effects. 
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on October 13, 2014, 10:15:42 PM
Mr. Market thinks that with low oil prices there's no more need for the fuel efficient Saver ships.
Still one of my largest holdings.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 14, 2014, 06:55:50 AM
Mr. Market thinks that with low oil prices there's no more need for the fuel efficient Saver ships.
Still one of my largest holdings.

This completely baffles me.  There are years in most of these charters.  The price of oil is of no relevance to Seaspan over the next few years.  A slowdown in China is of no relevance.  A global recession is of no relevance at least for a few yrs. 
Title: Re: ATCO - Atlas Corp
Post by: yadayada on October 17, 2014, 03:46:26 PM
so i got the share structure right, thing is roughly trading at 5-7x earnings of between the next few years? Why is it trading on chronic discount?

which shares are best to buy here? Im always at losss when there are preferred shares involved.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 17, 2014, 07:48:42 PM
so i got the share structure right, thing is roughly trading at 5-7x earnings of between the next few years? Why is it trading on chronic discount?

which shares are best to buy here? Im always at losss when there are preferred shares involved.

You really need to look at the proxy statements to appreciate this business.  The Washington Family of Vancouver are the largest shareholders and the company founders.  Kyle Washington and Gerry Wang (CEO) went to school together in Canada.  Seaspan was originally started as an off shoot of Seaspan Marine Corp, a ship building company in BC, owned by the Washington Family.  During the liquidity crisis in early 2009 Seaspan was having trouble meeting its covenants and Kyle Washington injected 200 million to see them through.  So they have a very interested owner. 

It trades low because it is not well understood.  SSW is not a shipping company.  It is a leasing company.  It has more akin to Ge Capital's car leasing business, or AIGs former plane leasing business.  SSW leases container ships to an assortment of shipping companies on long term leases. 

50 % of their clientele is two Chinese shipping companies. This looks risky because its China, but it isn't really risky.  One of the Chinese companies tried to pay SSW less per ship during the recession but Gerry held firm. 

The other apparent risk is their debt.  On a consolidated basis it looks high but it is segmented per ship.  This is not well understood. 

The other apparent risk is the shipping spot rates.  These have been low for a few years.  Spot rates are of little relevance to Seaspan.  SSW doesn't work to the spot rates. 

Whether it gets recognized one day is totally beyond my ability to forecast, and not part of my thesis.  It pays a great dividend that it increases each year, so the stock will rise with the dividend increase.  I think the company may eventually trade higher as it matures.  When I first bought the stock they had less than 20 ships if I recall correctly.

As to the preferred or common.  The Cs are around 9% right now with no stock upside.  If interest rates rose significantly there might be capital loss.  The common is yielding over 7.5% on purchase price today with stock and dividend upside.  My money is on the common.  Obviously, more volatile. 
Title: Re: ATCO - Atlas Corp
Post by: meiroy on October 18, 2014, 12:22:54 AM

50 % of their clientele is two Chinese shipping companies. This looks risky because its China, but it isn't really risky.  One of the Chinese companies tried to pay SSW less per ship during the recession but Gerry held firm.   

Could you clarify how this isn't really risky? The China situation is only starting and their successful adjustment is anything but guaranteed. Slowdown is inevitable and impact on anyone who relied on their over-investment is inevitable.

I do not know anything about this company, thank you for writing about it, but just this sentence makes me take two steps back thinking: 1.  Is China's over-investment/oversupply the reason for this company's growth or survival? 2. Now that China economy has to adjust, what is the impact?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 18, 2014, 05:37:33 AM

50 % of their clientele is two Chinese shipping companies. This looks risky because its China, but it isn't really risky.  One of the Chinese companies tried to pay SSW less per ship during the recession but Gerry held firm.   

Could you clarify how this isn't really risky? The China situation is only starting and their successful adjustment is anything but guaranteed. Slowdown is inevitable and impact on anyone who relied on their over-investment is inevitable.

I do not know anything about this company, thank you for writing about it, but just this sentence makes me take two steps back thinking: 1.  Is China's over-investment/oversupply the reason for this company's growth or survival? 2. Now that China economy has to adjust, what is the impact?


This precise misunderstanding is why SSW is trading down.  Unless China completely breaks all rules of contract law I dont see any problem.  And if they start doing that the world is going to hell real quick. 

Before investing read the financials!
Title: Re: ATCO - Atlas Corp
Post by: Hawks on October 18, 2014, 06:53:49 AM
meiroy
Listen to what uccmal is saying and his analysis over the years. And yeah, read the financials. Bought lots of SSW during last weeks turmoil.
Title: Re: ATCO - Atlas Corp
Post by: Packer16 on October 18, 2014, 07:02:06 AM
The Chinese counterparties to most of the leases are rated AA.  If you look at Seaspan's customer list you will find some of the most creditworthy shipping companies in the business.

Packer
Title: Re: ATCO - Atlas Corp
Post by: argonaut on October 18, 2014, 12:32:41 PM
Hi Uccmal,

Just a quick thought. Have you considered SFL? Somewhat higher div (over 10% last week) and last week traded just above $15 per share.

Cheers,

Argonaut
Title: Re: ATCO - Atlas Corp
Post by: meiroy on October 19, 2014, 09:07:22 PM

50 % of their clientele is two Chinese shipping companies. This looks risky because its China, but it isn't really risky.  One of the Chinese companies tried to pay SSW less per ship during the recession but Gerry held firm.   

Could you clarify how this isn't really risky? The China situation is only starting and their successful adjustment is anything but guaranteed. Slowdown is inevitable and impact on anyone who relied on their over-investment is inevitable.

I do not know anything about this company, thank you for writing about it, but just this sentence makes me take two steps back thinking: 1.  Is China's over-investment/oversupply the reason for this company's growth or survival? 2. Now that China economy has to adjust, what is the impact?


This precise misunderstanding is why SSW is trading down.  Unless China completely breaks all rules of contract law I dont see any problem.  And if they start doing that the world is going to hell real quick. 

Before investing read the financials!

The fact that, as you say, "50 % of their clientele is two Chinese shipping companies. " means that for me this does not pass qualitatively.  At a minimum this would require a significant discount.

I also don't see how a change of relationship between these two clients and a company would mean that " the world is going to hell real quick. ".  China is not even a net contributor to global economy but we won't get into that.

It also beyond me how someone could give AA credit ratings to companies where their audit working papers are a state secret and the country of origin itself is not based on the rule of law.

As I said I do not know the specifics but will not spend time on it as qualitatively it does not pass. Just a personal preference and we each have our own.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 20, 2014, 04:20:35 AM
Hi Uccmal,

Just a quick thought. Have you considered SFL? Somewhat higher div (over 10% last week) and last week traded just above $15 per share.

Cheers,

Argonaut

I had never heard of this company until now.  I did a huge amount of work on shippers in 2010 or so, including OSG?,  dry bulk, Diana, and others but never came across SFL.  Will have a bit more detailed look.  Probably one well run ship lease co. is enough in a portfolio.  There are always risks, of course.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on October 20, 2014, 04:29:08 AM

50 % of their clientele is two Chinese shipping companies. This looks risky because its China, but it isn't really risky.  One of the Chinese companies tried to pay SSW less per ship during the recession but Gerry held firm.   

Could you clarify how this isn't really risky? The China situation is only starting and their successful adjustment is anything but guaranteed. Slowdown is inevitable and impact on anyone who relied on their over-investment is inevitable.

I do not know anything about this company, thank you for writing about it, but just this sentence makes me take two steps back thinking: 1.  Is China's over-investment/oversupply the reason for this company's growth or survival? 2. Now that China economy has to adjust, what is the impact?


This precise misunderstanding is why SSW is trading down.  Unless China completely breaks all rules of contract law I dont see any problem.  And if they start doing that the world is going to hell real quick. 

Before investing read the financials!

The fact that, as you say, "50 % of their clientele is two Chinese shipping companies. " means that for me this does not pass qualitatively.  At a minimum this would require a significant discount.

I also don't see how a change of relationship between these two clients and a company would mean that " the world is going to hell real quick. ".  China is not even a net contributor to global economy but we won't get into that.

It also beyond me how someone could give AA credit ratings to companies where their audit working papers are a state secret and the country of origin itself is not based on the rule of law.

As I said I do not know the specifics but will not spend time on it as qualitatively it does not pass. Just a personal preference and we each have our own.


Fine by me. 
Title: Re: ATCO - Atlas Corp
Post by: crocodon on January 03, 2015, 12:02:12 AM
1. Found these thoughts on fast steaming interesting: http://www.joc.com/maritime-news/falling-bunker-price-gets-industry-talking-about-speeding-ships_20141103.html

2. Does anyone have information on how low bunker prices affect resale values for cargo vessels?
Title: Re: ATCO - Atlas Corp
Post by: JEast on January 03, 2015, 07:54:29 AM
Bunker costs are roughly 30-40% of operational costs for liners.  So yes, lower bunker costs have the potential for liners to go back to the faster routes.  However, I am of the belief that most major liners like the slower steaming but will selectively take a ship out of a route for the right price or customer demand.

As for the value of the assets, lower bunker costs will help the much older short-haul vessels to survive a little longer before being sold into the scrape markets.  The biggest influence on asset prices are scrape rates and customer demand more so than bunker costs.
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on January 12, 2015, 11:03:44 PM
Seaspan reported the MOL Express, a 4,600 TEU container vessel went aground in Tateyama Harbour, Japan on January 11, 2015. The company said all preliminary reports indicate the hull is in a stable condition, and no environmental damage has occurred. There were no reported crew injuries. Seaspan and MOL, with the assistance of salvage experts, are working on refloating the vessel.

http://www.nasdaq.com/article/seaspan-mol-express-vessel-in-stable-condition--quick-facts-20150113-00008
Title: Re: ATCO - Atlas Corp
Post by: JEast on July 30, 2015, 07:17:19 AM
As a small obligation as the originator of this thread, a couple of comments are as follows. 

SSW continues to be the gold standard in the ship leasing business.  Connected exclusively to the container ship industry (not to be confused with dry bulk), they also provide the most stable sector in the shipping industry.  The growth opportunities for SSW are still open as they continue to fulfill their promises.  Given the weakness in the ‘shipping’ industry overall, Seaspan looks to be a high quality growth opportunity for the more conservative investor.  For the long-term investor with a view of 3-4 years, opportunities for prices below $18 look attractive.


Cheers
JEast
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on July 30, 2015, 09:35:36 AM
Agreed,
Results were boring (in a good way) as usual
Title: Re: ATCO - Atlas Corp
Post by: obtuse_investor on December 07, 2015, 06:57:35 PM
I am pondering what all the sellers today (at a 52 week low of 14.25/shr) are thinking.


... I was obliged to take some shares off those sellers today. Looking forward to do that more.

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 07, 2015, 07:57:21 PM
I am pondering what all the sellers today (at a 52 week low of 14.25/shr) are thinking.

  • Are they worried that SSW would not be able to retain the large dividend in 2016 and are pricing that in?
  • Are they assuming that the high leverage that SSW has is going to cause trouble as China slows?
  • Are they thinking that the [potential] FED rate hike off of zero bound is going to make these high yielding companies less attractive (much like the midstream MLPs)?
  • Or is it something else altogether that I can't imagine right now?

... I was obliged to take some shares off those sellers today. Looking forward to do that more.

I cant figure this out so I gave up trying.  They have continuously added ships with long lease dates.  They are leased out to 2028 on some of the newest and biggest ships.  The stock is trading as if the slow down in the China trade makes a difference to Seaspan.  Gerry Wang indicated that maintenance costs would rise as the fleet ages but that shouldn't significantly affect the dividend IMO - we are talking ships floating on a soft surface with relatively stable temperatures that dont stop and start all day long, unlike jets, or automobiles.  These ships should be good to go for double their leases, at least. 

Last year the dividend increase was ~8%.  I would think that is sustainable for now.  What I am waiting to see is if some of the ships coming off lease are sold or re-leased at good rates.  It Could be what other investors are waiting to see.  It will make the difference between SSW being a long duration pyramid scheme, and a viable perpetual business model.  In the meantime I have made $6.40 in cash on the first shares I bought. 
Title: Re: ATCO - Atlas Corp
Post by: Hawks on December 07, 2015, 07:59:37 PM
Thank you Mr Market. I added further to my position.
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 07, 2015, 11:43:51 PM
I suppose people worry what happens when ships come off lease. Maersk just stacked triple-E ship(s). I like Seaspan, but is it cheap? Its dividend is attractive for income seekers but on a valuation basis it doesn't scream bargain - then again, I might value it the wrong way. I know newbuilds are coming online but TTM EBITDA of 450M versus roughly EV of 4.400M. And then there might be a bit of off balance sheet financing as well?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 08, 2015, 04:39:51 AM
I suppose people worry what happens when ships come off lease. Maersk just stacked triple-E ship(s). I like Seaspan, but is it cheap? It's dividend is attractive for income seekers but on a valuation basis it doesn't scream bargain - then again, I might value it the wrong way. I know newbuilds are coming online but TTM EBITDA of 450M versus roughly EV of 4.400M. And then there might be a bit of off balance sheet financing as well?

It is cheap on a book value basis, and certainly on a dividend yield basis, providing what I said above about it not being a long scale pyramid scheme.

In fact, if the business is sustainable, it is beyond insanely cheap.  I have made 64%, lets say 80%,  after compounding, on the dividend alone since I first bought shares in 2009. 

It is the China effect rubbing off on Seaspan. 
Title: Re: ATCO - Atlas Corp
Post by: buylowersellhigh on December 08, 2015, 07:06:56 AM
My only concern is the really the recent departure of the CFO.
Title: Re: ATCO - Atlas Corp
Post by: JEast on December 08, 2015, 07:23:17 AM
The shipping industry on the whole could be viewed at its four (4) sub-sector levels by the types of ships in use.  These types of ships are the dry bulk ships (carries coal, corn, iron ore, etc…), oil tankers (just oil here), specialty (mainly chemicals and offshore support vessels), and containers (hauls shoes, TVs, consumer goods).  Each shipping sub-sector has its own set of specific economic dynamics, but 3 of these 4 sub-sectors are all tied to the commodity industry.  As such, the shipping industry as a sector has been hammered and has had selling pressures for most of the year so not surprising that SSW is part of the downdraft.

As owners or potential owners of SSW, we know that they mainly ship TVs, shoes, furniture (consumer goods) for businesses like Wal-Mart , Kohl's, and Target (non-commodity).  As we get back to importing deflation into the US and toss in that bunker costs will be low for 2016, the major liners finances should hold up somewhat and maybe even give a push to get ships off their balance sheets which helps SSW.

The next 6-9 months most likely will remain bumpy along with the overall market.  Plus, SSW will likely have to take a write-down on 15-20 older ships in the first half of 2016 based on the values used in the refinancing deals from several years ago.  Also after Sai Chu’s retirement, they need a new CFO so the market will have to digest these items and we will have to suffer some pain while we wait.  On the other hand, the dividend should be increased 6-9% in March/April and an announcement on a few new contracts should be reported in the next few months.

Cheers
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 08, 2015, 07:39:07 AM
The shipping industry on the whole could be viewed at its four (4) sub-sector levels by the types of ships in use.  These types of ships are the dry bulk ships (carries coal, corn, iron ore, etc…), oil tankers (just oil here), specialty (mainly chemicals and offshore support vessels), and containers (hauls shoes, TVs, consumer goods).  Each shipping sub-sector has its own set of specific economic dynamics, but 3 of these 4 sub-sectors are all tied to the commodity industry.  As such, the shipping industry as a sector has been hammered and has had selling pressures for most of the year so not surprising that SSW is part of the downdraft.

As owners or potential owners of SSW, we know that they mainly ship TVs, shoes, furniture (consumer goods) for businesses like Wal-Mart , Kohl's, and Target (non-commodity).  As we get back to importing deflation into the US and toss in that bunker costs will be low for 2016, the major liners finances should hold up somewhat and maybe even give a push to get ships off their balance sheets which helps SSW.

The next 6-9 months most likely will remain bumpy along with the overall market.  Plus, SSW will likely have to take a write-down on 15-20 older ships in the first half of 2016 based on the values used in the refinancing deals from several years ago.  Also after Sai Chu’s retirement, they need a new CFO so the market will have to digest these items and we will have to suffer some pain while we wait.  On the other hand, the dividend should be increased 6-9% in March/April and an announcement on a few new contracts should be reported in the next few months.

Cheers

Thanks James. 

Of note: There are four newbuilds coming that are chartered to 2033. 

They certainly need a new CFO to help stabilize the public face.  One thing I do like about this company is the ability to verify the existence of the assets.  This is in comparison to a certain other Chinese company I once owned, that was associated in some way to the China forest industry. 
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 08, 2015, 07:58:46 AM
I suppose people worry what happens when ships come off lease. Maersk just stacked triple-E ship(s). I like Seaspan, but is it cheap? It's dividend is attractive for income seekers but on a valuation basis it doesn't scream bargain - then again, I might value it the wrong way. I know newbuilds are coming online but TTM EBITDA of 450M versus roughly EV of 4.400M. And then there might be a bit of off balance sheet financing as well?

It is cheap on a book value basis, and certainly on a dividend yield basis, providing what I said above about it not being a long scale pyramid scheme.

In fact, if the business is sustainable, it is beyond insanely cheap.  I have made 64%, lets say 80%,  after compounding, on the dividend alone since I first bought shares in 2009. 

It is the China effect rubbing off on Seaspan.
It's trading at a 20 percent discount to book value. But recently return on equity has been sub 5 percent, so why should it trade higher? I see drybulk shipping companies trading at a 80 percent discount to book value. Sure, they're not making money at moment, and I much prefer Seaspan, it's just that I have a hard time getting the numbers to add up. That plus 10 percent dividend yield looks very attractive, but what if it was cut - would it still be cheap? Obviously whether it pays dividends or not shouldn't change ones value of the company since retained earnings (at least in theory) are just as "good" are earnings payed out. I'm just wondering if we'd consider it cheap without the dividend.
Title: Re: ATCO - Atlas Corp
Post by: JEast on December 09, 2015, 11:24:39 AM
The JV with the Carlyle Group called Greater China Intermodal Investments was a five (5) year deal that expires next year and appears to have worked well.  The item I like best (besides having a great partner) is that it allowed SSW to expand their ship management business, plus it allows SSW to buy any ship if Carlyle wants to sell their assets.  Not really a big item in the numbers now, but if the company can expand the ship management side of the business then the increased entropy of the company adds a new dimension not captured by most today.

Reference:
Greater China Intermodal Investments (http://tinyurl.com/otj9ceq)

The point about dividends is a natural comment for the casual investor as reaching for yield is generally not a good idea.  However, most folks do not recognize that this equity is basically a REIT (i.e. Ship Asset Investment Trust or SAIT).  Much like a REIT, the cashflow can not always be invested back into the company in the timeframe one wants so might as well be tax efficient with the cash.  In SSW’s case, the dividend is actually deemed as ‘return of capital’ so it is 'tax-free' to the recipient until the asset is sold. At least a small nuance to be considered.
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 09, 2015, 12:18:46 PM
Good points but how do you value this and figure out it is cheap?
Title: Re: ATCO - Atlas Corp
Post by: watsa_is_a_randian_hero on December 12, 2015, 10:16:35 AM
Anybody look at SSWN?  This is senior debt due in Apr 2019 currently priced at 11.3% YTM.  Thats up from 7.4% just a couple weeks ago.  I hope they are buying back a ton on the open market right now!
Title: Re: ATCO - Atlas Corp
Post by: BG2008 on December 12, 2015, 11:50:44 AM
Anybody look at SSWN?  This is senior debt due in Apr 2019 currently priced at 11.3% YTM.  Thats up from 7.4% just a couple weeks ago.  I hope they are buying back a ton on the open market right now!

This is interesting.  Trading at around $20 on $25 par.  I just did a quick look at exchange traded debentures such as Seaspan 2019.  Most of them lose 20% during late 2014.  Are there any good reason for such move late last year?  Just trying to figure why they all uniformly dropped last year. 
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 12, 2015, 01:58:42 PM
I suppose people worry what happens when ships come off lease. Maersk just stacked triple-E ship(s). I like Seaspan, but is it cheap? It's dividend is attractive for income seekers but on a valuation basis it doesn't scream bargain - then again, I might value it the wrong way. I know newbuilds are coming online but TTM EBITDA of 450M versus roughly EV of 4.400M. And then there might be a bit of off balance sheet financing as well?

It is cheap on a book value basis, and certainly on a dividend yield basis, providing what I said above about it not being a long scale pyramid scheme.

In fact, if the business is sustainable, it is beyond insanely cheap.  I have made 64%, lets say 80%,  after compounding, on the dividend alone since I first bought shares in 2009. 

It is the China effect rubbing off on Seaspan.
It's trading at a 20 percent discount to book value. But recently return on equity has been sub 5 percent, so why should it trade higher? I see drybulk shipping companies trading at a 80 percent discount to book value. Sure, they're not making money at moment, and I much prefer Seaspan, it's just that I have a hard time getting the numbers to add up. That plus 10 percent dividend yield looks very attractive, but what if it was cut - would it still be cheap? Obviously whether it pays dividends or not shouldn't change ones value of the company since retained earnings (at least in theory) are just as "good" are earnings payed out. I'm just wondering if we'd consider it cheap without the dividend.

Okay, I have held SSW since December 2008 - 7 years.  I have bought more as we have gone along.  Until recently it made up 30% of my total holdings by dollar value.  Every year they have raised the dividend.  It is a priority.  I expect them to raise the dividend by 8% again this year.  To me that is a very good value, in an era when treasuries are paying nothing. 

The proviso is that they can handle the aging ships without significant end of lease capital losses.  Significant late in lease costs would indicate it is something of a very long term Ponzi scheme.  But, Management is good, and the BOD and management are heavily invested in seeing this work properly. 
This is in fact the only reason I haven't gone even higher in my position. 

In today's sideways market there is simply no where else to get returns of 8-10 %.  As Jeast has indicated reaching for yield can often be a bad thing, but I too dont see this as particularly dangerous with SSW.  It my be as simple as the market and analysts dont understand the company, and its lack of leverage to shipping in general. 

Title: Re: ATCO - Atlas Corp
Post by: BG2008 on December 13, 2015, 06:52:02 PM
My concerns about Seaspan

1.  The dividends are a return of capital, not a return on capital.  The difference between a REIT and container ships is that they both throw off a cashflow stream over time.  If you own the right kind of RE, the terminal value is worth substantially more than the debt that you put on those properties despite all sorts of GAAP depreciation.  This doesn't mean that you aren't earning a "true" return by Seaspan.  But one needs to look at the business from a life cycle perspective of purchasing ships at X, financing the purchase at Y% WACC, and whether salvage value is higher than depreciated cost.  I think that one needs to look at this over many years and if you can't answer this question then you could very well be in a pyramid scheme and not know it. 

2. 5 year average lease term.  Frankly, this worries me as I prefer to see portfolio lease terms that approach 8-10 years.  If December 2015 is the beginning of the burst of the credit bubble, then it could be quite painful as the leases roll off and the market can't absorb the excess capacity.  In the 20-F, they mentioned that the backlog is something like 18% of the worldwide TEU capacity during 2014.  That's kind of scary.  This leads me to my next point, container rates. 

3.  No one has mentioned anything about spot shipping rates.  They've falling off significantly.  Now you can say that SSW has long term leases.  But do they?  When the average lease length is 5 years, it's hard to claim that. 

https://ycharts.com/indicators/container_shipping_rate_for_4250_teu_vessels
http://www.maerskline.com/en-ca/shipping-services/rates-and-pricing
http://wolfstreet.com/2015/06/22/container-shipping-rates-from-china-to-the-us-europe-totally-collapse-ccfi-scfi/

4.  Just trying to be creative in imagining what could go wrong.  If SSW can't induce shippers to enter into more long term contracts.  The average lease length can quickly go from 5 years to 3 years.  At that point, SSW is in essence in the spot market.  From my experience, you never want to be a spot market shipper.   

5. Does anyone know what happened to SSW from 2007 to 2009.  There was a 70-80% loss in share price.  Also, distribution per share collapsed from 47.5 cents per quarter to 10 cents a quarter and have not recovered back to 47.5.  I don't know if we are going into a 2009.  But I stress test my investment under those kind of scenarios.   

Title: Re: ATCO - Atlas Corp
Post by: JEast on December 14, 2015, 09:34:55 AM
Yes, risk is present in this equity.  If you already own it, more selling pressure will probably persist so the question is can you tolerate the pain until the tide turns?  Always a tough call but also gives one the potential opportunity.  As one of this board’s heroes indicates – this investing stuff is not supposed to be easy.  Put my comments in the camp of daring to look foolish.

#1 – Valid point about a potential appreciating asset versus a depreciating asset and return of capital.  I used the REIT analogy as potential investors are more familiar with REITs more so than the aircraft leasing model where you do have a depreciating asset with an ending salvage value (i.e. AIG’s previous International Lease Finance Corp.).  For the most part, with either aircraft or ships they are depreciated over a 25-year life and are useful for about 30 years.

#2 – As a company in this space grows larger, just the mathematics of the business forces the average lease term to shrink since you are looking for 8-12 year leases that are only booked over the cycle.  However, that does not imply that the cashflow will shrink because of the overall shorter lease term relative to earlier years.

#3 – Spot rates have come down considerably and the reason SSW will most likely see an asset impairment in the 2nd quarter of 2016, or earlier.  Spot rates obviously play a roll when parties enter into a 10-year deal, but both parties are looking at more than just 6-12 month rates alone.

#4 – SSW does not have to enter into deals that are not rewarding.  If there are no long-term deals available, just sit and run the business until a deal arrives.  The biggest risk is counter party risk of not paying leases.  However and due to maritime law, in essence the ship owner has ownership of all cargo until the ship enters port.  For reference, the cargo is worth 10X or more than the lease payment and partially the reason no lease payment has lapsed in the company’s history – at least to my knowledge.  Side note: shipping has many very unique aspects to it across all the shipping sectors.  For example, in the oil tanker business you never want to have leases but instead always want to be in the spot market (counter intuitive).

#5 – In ’07-’09 there was a liquidity crisis as many will recall and the thought at the time was that many counter parties would not pay their bills (or in SSW’s case, pay their leases).  During this timeframe, the bulk of SSW’s counter party risk was indirectly tied to the Chinese government and I had a belief then that the Chinese government would not want to default on leases which turned out to be correct.  (Will this continue?)  Anyway, SSW cut the dividend back then just in case and to build cash levels to fund growth as they did not know if their bankers would be around or even survive.  As such, the funding avenues for SSW’s growth have expanded considerably over the last six years as they have done a number of different types of financing deals versus just based on the banks.

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 21, 2015, 07:26:55 AM
As an aside.  Why the sudden onset of analyst coverage of SSW?  This is partly why the stock is down.  WFC, and JPM have both initiated negative coverage on SSW, for the first time.  It was ignored by the major investment firms before.
Title: Re: ATCO - Atlas Corp
Post by: fareastwarriors on December 21, 2015, 08:41:37 AM
I have the JPM report attached here if people are interested.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 22, 2015, 05:01:39 AM
Thanks for the JPM report Fareast.  It enlightened me to analyst thinking around SSW.  An exhaustive review of the containership business, an acknowledgement that SSW operates on different metrics, and then an estimate for SSW based on prevailing containership spot rates.  Analysts dont want to step out on this one.  And SSW doesn't fit their spreadsheet templates.  The limited imagination of the bureaucratic mindset. 

They acknowledge the 10%+ dividend rate and its stability, and then they promptly lowball the price.  Where else are you going to get a safe, 10 % dividend, growing at 8% per year? 
Title: Re: ATCO - Atlas Corp
Post by: JEast on December 22, 2015, 05:55:56 AM
Spreadsheet templates -- ha ha. 

Brokerages don't have the people power they used to have to differentiate shipping sectors so they mostly lump them together as mentioned in a previous post.  Noticed that part of the calculation in the JPM report uses utilization rates (his buddy's spreadsheet) from drybulk ships (i.e. ton-mile demand / dwt*mile).

The next six months should be full of uncertainty in the shipping sector as well as for SSW too.  However, an expected announcement of a new contract or a new payout announcement should steady the waters a little.
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 22, 2015, 06:21:29 AM
According to that JPM analyst it's trading at 10.4 x FY2015E Ebitda. Any of you guys have a fair value? It doesn't exactly scream cheap considering how it's a capital intensive business, there's a good chunk of debt plus a good chance of an impairment in 2016. I like the company but I'm interested how you guys value it.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 22, 2015, 07:10:01 AM
According to that JPM analyst it's trading at 10.4 x FY2015E Ebitda. Any of you guys have a fair value? It doesn't exactly scream cheap considering how it's a capital intensive business, there's a good chunk of debt plus a good chance of an impairment in 2016. I like the company but I'm interested how you guys value it.

By the dividend.  My aggregate purchase price in some of my non- taxable accounts is around $15.00. 
Since I have held it, it has paid me back 6.40 per share.  Nothing is that clear cut mind you.  I have sold shares at much higher prices, and bought them at higher prices than today, and originally at much lower prices.  The original shares I have held have probably been turned over a couple of times since 2008/09.  I have watched for years and read all their reports along the way. 

IMHO the dividend is safe and likely to grow.  In todays environment that gives you an automatic return of > 8%.  If you can beat 8% in a zero interest rate environment without having to overly worry about it, good luck.  The annual returns posted this year by board members are going to be low.  The US big banks have done nothing for years, tech. stocks with notable exceptions are sort of neutral, and oil related stuff, well thats another thing. 10.4% doubles your money in 7 years, with no capital gains. 

I am not sure how else to value SSW since it really has no comparables - maybe Aercap, or divisions of the former GE capital (their auto/truck fleet services was never reported as a separate division but they were the largest fleet owner in the US for two decades). 

As I have mentioned over and over, my only worry is that there is some ship left at the end of the lease, or that the lease profits completely cover a ships cost.  Otherwise it is not sustainable.  The write downs James is referring too, if they materialize, will be telling.  However, if they get re-leases, or can sell used ships at a price that exceeds payouts plus capex for the ships in aggregate, then it will work well, and the stock will pop. 

It is a capital instensive business, but unlike a mining operation, or a large plant, it instantly generates cash.  We dont know if Tesla's battery plant will generate cash, whereas every SSW ship generates cash when it leaves the ship yard. 
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 22, 2015, 07:18:16 AM
I will add that if you cant get comfotable with it, amd some cant, then stay away.  I have followed it for 7 years, and trust management as much as any other company out there, except Buffett.  They have made a couple of minor blunders along the way, but nothing like the horrible gaffs of other much loved companies on this board. 
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 22, 2015, 07:21:08 AM
One more thing that applies to almost all the stocks I hold this year.  There is tax loss selling going on!
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 22, 2015, 08:10:38 AM
Thanks for the reply, Uccmal. Much appreciated. I get what you're saying but guess I'm just not comfortable valuing a business on it's dividend yield.
Title: Re: ATCO - Atlas Corp
Post by: siddharth18 on December 22, 2015, 01:23:00 PM
Has anyone looked at Singapore Shipping Corp? Smart owners from Singapore operating in the PCTC (Pure Car/Truck Carrier) niche with average lease terms that are MUCH longer than SSW -

http://quinzedix.blogspot.in/2015/11/singapore-shipping-corporation-pure-car.html (http://quinzedix.blogspot.in/2015/11/singapore-shipping-corporation-pure-car.html)


Not to derail the SSW discussion but I think Singapore shipping corp is worthy of a look if you find SSW attractive.
Title: Re: ATCO - Atlas Corp
Post by: goldfinger on March 08, 2016, 07:40:48 AM
2015 Results were quite strong. Any idea what the market is looking for?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 08, 2016, 08:54:38 AM
2015 Results were quite strong. Any idea what the market is looking for?

I suspect the lack of a dividend increase has thrown people off.  Also, the warnings of greater Op. ex. without a number attached to them.  I find it strange they didn't raise the payout given that there is a significant amount going straight back in with the Drip, anyway.  I think management wants to get the stock price up by retaining more earnings, FWIW. 

I listened to the Q&A.  The Ceo is quite the chatterbox, but there was nothing particularly enlightening.  Steady as it goes. 
Title: Re: ATCO - Atlas Corp
Post by: goldfinger on March 08, 2016, 01:06:01 PM
It seems to be that they are conserving cash to increase buybacks...  ;D
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on March 11, 2016, 07:16:42 AM
Now that I have had a coupke of days to review the conference call, and the numbers, I am getting a better idea what is going on, and why the dividend wasn't raised this year. 

Highlights:
- they have 30 or so ships coming up for release over 2016/2017.  They are holding out to see what rates they can get.
- they are intending to buy in the partnership with Carlisle Group
- other PE firms are rumbling about exiting deals in the space and SSW is looking to pick up some assets there.
- planning on getting into container leasing as well? 
- they are buying in the Series C preferreds.  I think Gerry Wang wants to work toward cheaper financing by strengthening the blaance sheet. 
- Gerry has indicated that alot of 80s and 90s container ships are headed for scrap - it is more expensive to retrofit for new  environmental regulations than scrap and buy new. 

I have pared my position to about 25% lower, just because it was too big.  If the stock dips into the sub $14 range I will be a buyer again. 
Title: Re: ATCO - Atlas Corp
Post by: JEast on May 19, 2016, 05:33:30 AM
Back in December I mentioned that the next six months should be full of uncertainty in the shipping sector turned out to be somewhat of an understatement.  Still some choppy water ahead, but as all the new liner alliances get their grounding and as the liners figure which routes they want with the new panama canal lock opening, then we shall see.

Looks like SSW is preparing for such with the new financing deal just announced.  Plus, CGI paid part of their loan back, $50m of the $230m.
http://seaspan.mwnewsroom.com/Files/2e/2e07b25e-63a4-42bc-aba3-dbacea0c6013.pdf (http://seaspan.mwnewsroom.com/Files/2e/2e07b25e-63a4-42bc-aba3-dbacea0c6013.pdf)
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on May 24, 2016, 08:05:11 AM
Seaspan Announces Pricing of 5,000,000 Class A Common Share Public Offering at $14.70 per share
https://www.sec.gov/Archives/edgar/data/1332639/000119312516599959/d365107dex99i.htm
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 24, 2016, 10:03:35 AM
Seaspan Announces Pricing of 5,000,000 Class A Common Share Public Offering at $14.70 per share
https://www.sec.gov/Archives/edgar/data/1332639/000119312516599959/d365107dex99i.htm

They are actively raising capital to buy in Carlyle Group's share of the partnership.  Prefs last week, common today.  The rate on the Prefs. was the best yet for Seaspan, not a pref. buyer. 
Title: Re: ATCO - Atlas Corp
Post by: kab60 on May 24, 2016, 10:46:28 AM
Looking at the rates at Maersk as well as CMA and their current operations I'm surprised SSW is still trading at these levels. I'm a little late with the bear warning, but I think it could get really ugly when they need to renew contracts and at these levels I still don't figure how anyone think it's cheap. I think people would value if differently without the divy which is silly.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on May 25, 2016, 07:32:09 AM
Looking at the rates at Maersk as well as CMA and their current operations I'm surprised SSW is still trading at these levels. I'm a little late with the bear warning, but I think it could get really ugly when they need to renew contracts and at these levels I still don't figure how anyone think it's cheap. I think people would value if differently without the divy which is silly.

So far, this is rechartering is not a significant concern.  Over the next couple of years only 5-6% of the fleet is up for recharter.  The new boats are chartering in advance of construction for 8 to 17 years.  It is unknown if future recharter rates will be the same, lower, or perhaps higher. 

If there was no dividend they would be adding 150 m to the balance sheet every year.  That is a 10 % growth rate in and of itself - take your pick.  But, you are right: the dividend is expected, and priced into the shares. Since 2008 I have been paid around $8.00 per share
Title: Re: ATCO - Atlas Corp
Post by: gurpaul88 on May 25, 2016, 08:07:04 AM
Curious to what level you think this would be a buy, tia.
Title: Re: ATCO - Atlas Corp
Post by: JEast on June 01, 2016, 05:06:33 AM
Cheap or not cheap?  If one believes that inflation is 3-5 years out, then SSW is definitely not cheap.  On the other hand, what is a (semi) double-net-lease worth in a very extended 1% environment?

If we remain in a non-inflationary period for the next decade then a few characteristics may stand out.  1) SSW’s all-in capital costs are approaching one-third less then what they were just 5 years ago, 2) as such, renewal rates going forward do not need to be what they where in the past, and 3) alternatives for capital light options to the major liners has contracted significantly (i.e. major liners would like to use SSW’s balance sheet to fund a portion of their capital projects going forward as banks have pulled in their horns). 

So the open question seems to be is SSW adding value to the shipping industry, or not?  For the present, they seem to be providing value to their customers and have demonstrated to be honest brokers.  Once this current tsunami in the container shipping alliances and new trade routes settle down and capital plans come together for the major liners, things may look quite different in 12-18 months.  This is not a three-bagger but just seems more like quality with a limited downside from these levels.

As a guy from Omaha has indicated, if governmental policies remain benign for a protracted period of time than many things are very inexpensive today that do not appear to be so on the surface.

New Panama Canal Lock Opening (http://www.bloomberg.com/news/articles/2016-05-25/panama-canal-fever-sweeps-globe-again-as-new-era-in-trade-nears)
Title: Re: ATCO - Atlas Corp
Post by: kab60 on August 29, 2016, 06:21:51 AM
Hanjin prevailed? Seaspan cut the rates - http://english.yonhapnews.co.kr/business/2016/08/28/39/0501000000AEN20160828000352320F.html
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on August 29, 2016, 10:09:21 AM
I am underwhelmed with Seaspan at the moment.  My plan is to shrink the relative size of my SSW position by redeploying the dividends into other stocks or to pay debt. 

The balance sheet and what is going on are hard to follow at the moment.  They have scrapped two relatively new smaller ships in the past couple of weeks for far less than the purchase price minus accumulated depreciation. 

Now, they have had to capitulate to Hanjin.  On a cost benefit analysis it was obviously better to reduce rates for Hanjin for the 8 or so ships chartered than to try to recharter or scrap them.  Lets hope their bigger customers dont see this as an opportunity.  No details were given on what kind of deal was reached - probably a deal to charter for longer and add newer ships.

Layering onto this had been several preferred share issues at rates from 7 to 8.5%  to pay for ships.  I am guessing the plan is to buy in the Carlisle Group partnership which will give them more ships which to my mind is a dubious objective.  As they have grown in size they have become more and more at the mercy of the industry dynamics as a whole. 

Not saying that they are badly run.  I just think it is a partial pyramid scheme that only works properly if container shipping demand grows over time.  Of course I knew this and have indicated it a few times on the board.  So, in summary, shareholders are totally at the mercy of the shipping cycle now, amd I womt be adding any shares.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on August 30, 2016, 07:43:30 AM
Hanjin prevailed? Seaspan cut the rates - http://english.yonhapnews.co.kr/business/2016/08/28/39/0501000000AEN20160828000352320F.html

Okay, well apparently not.  Gerry Wang says they will not ever cut rates:

https://www.lloydslist.com/ll/sector/containers/article535131.ece
Title: Re: ATCO - Atlas Corp
Post by: kab60 on August 30, 2016, 08:07:13 AM
Strange. I was surprised I couldn't find a statement debunking the story yesterday. Rate cuts or not, I don't like this part;
However, Seaspan is willing to help in other ways, said Mr Wang. That could involve, for example, investing in a revamped Hanjin Shipping should a new ownership structure take shape, or ordering ships on behalf of the South Korean line.
But nothing could be decided until the outcome of the current crisis is known, said Mr Wang.
Title: Re: ATCO - Atlas Corp
Post by: gurpaul88 on August 31, 2016, 01:03:14 PM
Any thoughts on Tsakos Energy Navigation Ltd  (TNP) (oil and gas shipper) been hit pretty hard this year, preferred's have rallied quite a bit while common continues to slide.
Title: Re: ATCO - Atlas Corp
Post by: kab60 on September 03, 2016, 02:36:29 AM
Don't know that one. In this space I prefer SFL, but I have no position. They have drybulk, containers, drilling rigs and crude carriers - but most of all they seem to have good management. But not without hair.
Title: Re: ATCO - Atlas Corp
Post by: argonaut on September 03, 2016, 06:40:40 AM
I owned SFL (not currently) for several years starting after 2008... It paid a nice div and the CEO seemed to manage the down turn well (and continues too)...I sold out recently when it hit 18-19 because I had other stocks with more upside the STL at that level... Just my .02
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on September 12, 2016, 10:52:05 PM
http://www.bloomberg.com/news/articles/2016-09-13/hanjin-s-fall-is-lehman-moment-for-shipping-seaspan-ceo-says

Title: Re: ATCO - Atlas Corp
Post by: Uccmal on September 13, 2016, 06:22:53 AM
http://www.bloomberg.com/news/articles/2016-09-13/hanjin-s-fall-is-lehman-moment-for-shipping-seaspan-ceo-says



Thanks <IV.  I am hoping the pricing for the Carlisle group buy in reflects the loss of ships under contract to Hanjin via CGI.  Otherwise, over the long term this bodes well for Seaspan through higher prices.  It amazes me how much supply each of these ships carries ( billions of dollars). 
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 02, 2016, 08:39:10 AM
3rd Q earnings out.  I should have dumped the whole posiiton when it was plus $20.00.  Hindsight is 20/20. 

200 Million writedown on older ships.  I dumped more than 50% of my position after the earnings.  The rest I will leave alone for now.  Management is trying to talk the stock up by diverting the focus on the capacity that is being scrapped worldwide, while they keep ordering > 10000 TEU ships.  The problem is that SSW makes up a good portion of the capacity.  So, they will have more writedowns coming. 

It was good while it lasted. 
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on November 02, 2016, 08:44:45 AM
3rd Q earnings out.  I should have dumped the whole posiiton when it was plus $20.00.  Hindsight is 20/20. 

200 Million writedown on older ships.  I dumped more than 50% of my position after the earnings.  The rest I will leave alone for now.  Management is trying to talk the stock up by diverting the focus on the capacity that is being scrapped worldwide, while they keep ordering > 10000 TEU ships.  The problem is that SSW makes up a good portion of the capacity.  So, they will have more writedowns coming. 

It was good while it lasted. 

The dividend yield on the common looks crazy, do you think it's sustainable?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 02, 2016, 11:02:02 AM
3rd Q earnings out.  I should have dumped the whole posiiton when it was plus $20.00.  Hindsight is 20/20. 

200 Million writedown on older ships.  I dumped more than 50% of my position after the earnings.  The rest I will leave alone for now.  Management is trying to talk the stock up by diverting the focus on the capacity that is being scrapped worldwide, while they keep ordering > 10000 TEU ships.  The problem is that SSW makes up a good portion of the capacity.  So, they will have more writedowns coming. 

It was good while it lasted. 

The dividend yield on the common looks crazy, do you think it's sustainable?

Interesting question.  I dont know.  But that is obviously my worry or I would have kept all of my shares.  The company has always looked a bit like a pyramid scheme, something I have mentioned going back years on this thread. 
Title: Re: ATCO - Atlas Corp
Post by: doc75 on November 02, 2016, 11:45:24 AM
They were asked about the dividend on the CC.  CFO's response:

"So I think what we've said is that we've sort of reaffirmed the dividend for the fourth quarter. The Company has had a very standard policy for a number of years that we sort of look at things in February for the year, at sort of next Board meeting and that's the time where the Board will set the dividend for the next year. I think when we kind of look at sort of the financial situation we're in, we're sitting on a lot of cash, there's other liquidity, we don't have a lot of CapEx that's sort of unfunded ahead of us. We do have some vessels, which are unencumbered that we would expect to sort of finance. And the cash flow that we're showing, cash flow to common shareholders for the quarter was around sort of $19 million. And obviously we've given guidance, line-item guidance for the next quarter. But we understand the importance of dividends, but I think we're going to follow the same policies that the Company has followed for many years as far as the protocol with the dividends in the February meeting."

He's sort of non-committal and kind of talking around the issue, but it sort of seems that he's sort of telling us they'll think about the dividend in February and it sort of depends but they could kind of fund it for a while via the balance sheet. Sort of. Maybe. Obviously.
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on November 02, 2016, 01:34:27 PM
I've had my doubts about SSW lately.  I sold my entire position about a month ago.  It was an excellent return all in, but I think the business model is flawed.  A couple years ago the only model was "long term charter", I now see the following breakout:
 - 71 operating vessels
 - 3 vessels no charter
 - 5 vessels < 3 year charter (plus options)
 - 4 vessels bareboat / 5 years

From 0% to 15% dilution of the model..  but the really concerning thing for me is that I haven't seen a single long-term recharter of any vessels.  All vessels that have come off of a long term charter have been redeployed in short term capacity.

I'm sure many vessels will get taken up on longer charters once there is an under-supply situation, but meanwhile SSW is left holding the bag.  The long term charters are set at mid-cycle rates, so SSW will miss the cyclical shipping boom but will be left chartering/day rating during bust cycles.  This will result in an earnings drag.

One other thing that is concerning to me.  SSW tends to negotiate initial contracts and charters during shipping booms (not always, but mostly because of when their customers are willing to enter into long term charters).  This means they are paying top dollar for the vessel, but are chartering out at generally competitive rates because the charters are so long.  This is a different type of earnings drag because the cost of the vessel is fixed and usually ordered in boom times but the charters are variable and not always negotiated in boom times.

I think this counts as calling it.

A quick count shows about 25 of 87 vessels are now either on no charter or are up for renewal in the next 2 years.  That's way up from my account of 8/71 from 3 years ago.  Based on the $208mm impairment charge for 10 vessels, you could see an additional $300mm+ write-down for the remaining 15.  Keep in mind, this is for a company with a 1bn market cap.

I'll reiterate - I think the business model is broken.  What we're seeing here is a few people getting rich because massive leverage is being used.  When you're dealing with billions, what does it matter that the CEO is taking home 50 million?
Title: Re: ATCO - Atlas Corp
Post by: obtuse_investor on November 02, 2016, 05:28:45 PM
I think the key question is that with the current market price of 10.55, is the risk premium high enough?

As long SSW can sail through the current storm in one piece, the current risk premium may by justified. I am not calling the bottom (I have no clue where that is), but current premium sounds more in the right vicinity.

I'd love to know JEast's (thread's OP) opinion on the matter.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 02, 2016, 07:51:59 PM
I've had my doubts about SSW lately.  I sold my entire position about a month ago.  It was an excellent return all in, but I think the business model is flawed.  A couple years ago the only model was "long term charter", I now see the following breakout:
 - 71 operating vessels
 - 3 vessels no charter
 - 5 vessels < 3 year charter (plus options)
 - 4 vessels bareboat / 5 years

From 0% to 15% dilution of the model..  but the really concerning thing for me is that I haven't seen a single long-term recharter of any vessels.  All vessels that have come off of a long term charter have been redeployed in short term capacity.

I'm sure many vessels will get taken up on longer charters once there is an under-supply situation, but meanwhile SSW is left holding the bag.  The long term charters are set at mid-cycle rates, so SSW will miss the cyclical shipping boom but will be left chartering/day rating during bust cycles.  This will result in an earnings drag.

One other thing that is concerning to me.  SSW tends to negotiate initial contracts and charters during shipping booms (not always, but mostly because of when their customers are willing to enter into long term charters).  This means they are paying top dollar for the vessel, but are chartering out at generally competitive rates because the charters are so long.  This is a different type of earnings drag because the cost of the vessel is fixed and usually ordered in boom times but the charters are variable and not always negotiated in boom times.

I think this counts as calling it.

A quick count shows about 25 of 87 vessels are now either on no charter or are up for renewal in the next 2 years.  That's way up from my account of 8/71 from 3 years ago.  Based on the $208mm impairment charge for 10 vessels, you could see an additional $300mm+ write-down for the remaining 15.  Keep in mind, this is for a company with a 1bn market cap.

I'll reiterate - I think the business model is broken.  What we're seeing here is a few people getting rich because massive leverage is being used.  When you're dealing with billions, what does it matter that the CEO is taking home 50 million?

You were definitely on the right track.... and still are.  One thing that has always bothered me is the pref. share issues.  The interest rates in todays environment are nuts.  Without digging much deeper this seems to be the way that the Washington family and associates are paying themselves. 

The business model is flawed because it is a pyramid scheme.  They need to constantly grow bigger to cover the ever growing write downs.  So, now they have reached a limit to growth. 

Personally, I have made some money since 2008 on this stock but it is not really what I intended to be the outcome.  The money I have made has been on the dividends and the currency arbitrage - buying the stock when the CDN. dollar was high and selling it when the dollar is low. 

I think the key question is that with the current market price of 10.55, is the risk premium high enough?

As long SSW can sail through the current storm in one piece, the current risk premium may by justified. I am not calling the bottom (I have no clue where that is), but current premium sounds more in the right vicinity.

I'd love to know JEast's (thread's OP) opinion on the matter.

Again I cant answer that.  I find the balance sheet and the income statements hard to follow.  The sale/leasebacks, ship writedowns, and constant capital raises make tracking what is actually going on difficult.  If there is anything I have relearned here is that a balance sheet with all this confusion is probably not healthy.  SSW has always used all sorts of 'other' measures, that are not gaap.  This may be appropriate for an oil company, or a reit, where there are legitimate tax reasons to report other than gaap. 

I dont think anything is a fraud.  I just think it is really just a crappy business caught in a crappy commodity cycle. 

Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on November 02, 2016, 09:33:30 PM
Doesn't really add anything but I towed the Boa Barge 10 back & forth multiple times from here to Lake Maracaibo in the early/mid 90's (fun times...)

Probably ought to clarify that Seaspan owned a fleet of semi submersible barges back then & the Boa Barge 10 was one of them (don't know if they still do...)
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 03, 2016, 07:35:17 AM
Finally, and I will wash my hands of this mistake, hoping I learned something.  Munger might look at this company and comment on their metrics: distributable cash; ebit; etc, as problems with the actual business model.  They have seldom been EPS profitable. 

The capital raises this year indicate that SSW is burning cash to stand still.  Whether this rights itself in the alleged capacity rebalance is anyones guess.  I am keeping a small amount if shares as a place holder. 
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on November 03, 2016, 07:41:12 AM
Finally, and I will wash my hands of this mistake, hoping I learned something.  Munger might look at this company and comment on their metrics: distributable cash; ebit; etc, as problems with the actual business model.  They have seldom been EPS profitable. 

The capital raises this year indicate that SSW is burning cash to stand still.  Whether this rights itself in the alleged capacity rebalance is anyones guess.  I am keeping a small amount if shares as a place holder. 

Had the exact same feeling earlier this year when I dumped my shares
Title: Re: ATCO - Atlas Corp
Post by: VAL9000 on November 03, 2016, 08:07:26 AM
I think the key question is that with the current market price of 10.55, is the risk premium high enough?

I think it's pretty easy to figure out - it's a discounted cashflow model that takes into account +contract profit, +vessel value at close of contracts, -debt, -preferreds, -overhead costs.

The major unknown is - what's the value of the vessel at the close of contracts?  This is overwhelmingly the variable that will impact your risk premium.  I'm not going to do any of the above the math, because I'm pretty sure that the $6-8bn in vessels are going to be written-down substantially.  I'd guess that they write down enough to wipe out the common (go private), then sell what they have to pay back the preferreds.

Here is my view on why the vessels are going to tank in value:
 - Consolidation of SSW's customers is underway (see Alliances, see Japanese shipper merger).  This is bad for price negotiation on contracts / resale of vessels to liners.
 - Global warming is opening up more efficient trade routes.  This pushes shipping further into oversupply territory.
 - Technology is advancing at a faster rate, providing better alternatives to the existing fleet.  12 year contracts are great, but not so great if you exit the contract with an obsolete asset.

If you want to gamble on the outcome, probably the best time to buy shares is shortly after the February dividend announcement, where they're likely to cut the dividend.  Last time they did this, the stock capitulated (capsized?) and you could scoop up shares for $6.5.
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on November 06, 2016, 12:06:50 AM
http://theloadstar.co.uk/seaspan-sells-youngest-ever-container-vessel-for-scrap-as-idle-fleet-nears-1m-teu-mark/

Meanwhile, it appears that Seaspan, the biggest containership non-operating owner, has decided that the Panamax charter market is unlikely to improve anytime soon.
According to shipbroker reports, the NYSE-listed container vessel lessor has sold its 2003-built 4,646 teu Seaspan Excellence (previously known as the MOL Excellence) for a sum reported by vesselsvalue.com as $280 LDT [light displacement tonne, the measure used by scrap buyers], equating to a total demolition value of $5.96m.
The deal gives a useful snapshot of the container chartering market – Seaspan bought the vessel from MOL in March 2013 for $17.2m, only to be forced to sell it for scrap for $11.25m less than it paid for it just three and half years later, and at least a decade before the end of its operating lifetime
Title: Re: ATCO - Atlas Corp
Post by: ScottHall on November 06, 2016, 01:21:21 PM
Forget it Jake, it's Chinatown.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on November 07, 2016, 08:08:56 AM
All out.  This is going to get worse before it gets better, for all the reasons listed above by myself and other posters. 

The balance sheet, as I comprehend it, is too fragile to sustain the present value of the common stock in the event of a recession.  I dont think they go bankrupt, but the common stock could well break a dollar, making it a private company held by the pref. shareholders.  The window to access capital is likely closed for them now. 

As a betting man I say the dividend gets cut by alot, if not 100%. 

Title: Re: ATCO - Atlas Corp
Post by: finetrader on November 07, 2016, 09:01:24 AM
comparing Seaspan business model to a REIT was probably an aggressive way of evaluating this company.

I did not invest in Seaspan (well I've traded it a few years ago)  but I've been following the story.
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on December 23, 2016, 09:21:54 AM
Does anyone have any docs or know a rule-of-thumb for estimating lightweight displacement tonnage from DWT? All I can find on SSW's website is DWT and the only DWT-LDT matrix I can find (vesselvalues.com) is behind a paywall.
Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on December 23, 2016, 11:03:21 PM
Does anyone have any docs or know a rule-of-thumb for estimating lightweight displacement tonnage from DWT? All I can find on SSW's website is DWT and the only DWT-LDT matrix I can find (vesselvalues.com) is behind a paywall.

Those 2 measurements represent different physical objects.

Are you trying to figure based upon a specific load out?

If not then both these figures can be obtained from vessel tonnage certificates.

LDT is the weight of the vessel as it comes from the shipyard & doesn't include any consumables (fuel, lube, water, galley stores, etc.) & is listed as gross tons on a tonnage certificate.

DWT includes all cargo & consumables minus LDT & is listed as net tonnage on a cert.

Displacement & tonnage can be very confusing as you'll encounter domestic (US) & international (ITC) certs.

My vessel is registered on the International Tonnage Certificate at 2998 gross tons which means that there is 299,800 cu. ft. of enclosed space on the vessel & it displaces 2998 tons of H2O (we don't have a domestic cert because we're a SOLAS boat.)

The net tonnage for the vessel is 1164 & this means that out of the 299,800 cu. ft. of total enclosed space, 116,400 cu. ft. is actual cargo space (to confuse things more, I can load another 1,500 or so tons on deck & this doesn't get included in the net tonnage or DWT on the cert because it's not enclosed space but you can bet it gets included on my stability calcs.)

US tonnage certs indicate much lower gross tonnage because naval architects add removable "tonnage hatches" in all internal living spaces & at least one hatch leading from an internal to an external space (usually behind the main superstructure & leading to the deck) these hatches can be un-bolted & removed to create a continuous space which is open to the outdoors.

Basically they are saying that since all this space can conceivably be opened to the deck, it doesn't exist & should not be included in the gross tonnage (try going through the Panama or Suez canal or getting pulled out of the water at a dry dock using a Domestic Tonnage Certificate - not...)

They do this to allow guys with 100 ton licenses to run a vessel that is by all rights a 400 to 500 ton boat.

Give me some vessel specifics & I may be more helpful...
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on December 24, 2016, 06:41:21 AM
Thanks for the reply. I'm trying to get an estimate of the mass of the vessel (LDT) to estimate scrap value. On seaspans fleet section they have DWT (mass of fully loaded vessel?) and gross tonnage (volume of vessel interior). I figured I'd need to estimate DWT to LDT conversion factor, since scrap prices are per LDT.

Am I thinking about this wrong? How much would you get if you scrapped the below at $250 per LDT?

http://www.seaspancorp.com/vessels/cosco-japan/

Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on December 24, 2016, 10:17:32 AM
Thanks for the reply. I'm trying to get an estimate of the mass of the vessel (LDT) to estimate scrap value. On seaspans fleet section they have DWT (mass of fully loaded vessel?) and gross tonnage (volume of vessel interior). I figured I'd need to estimate DWT to LDT conversion factor, since scrap prices are per LDT.

Am I thinking about this wrong? How much would you get if you scrapped the below at $250 per LDT?

http://www.seaspancorp.com/vessels/cosco-japan/

If you have the gross tonnage then that is the amount of water displaced by the vessel with no cargo or consumables.

There will also be a lot more valuable metals like copper & stainless steel in this measurement.

91,050 x $250 = $22,762,750.

You should be aware that it's not unusual to see different tonnages reported on Certificate of Registry & a Certificate of Inspection & a Class Certificate.

Where did the gross tonnage on the website come from?

Is it reported correctly?

Ask the company if it came from the International Tonnage Certificate...
Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on December 24, 2016, 09:11:31 PM
I almost forgot.

Is salvage value based on a long ton (2240 lbs) or a short ton (2000 lbs) ?
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on December 26, 2016, 08:53:05 PM
https://en.m.wikipedia.org/wiki/Gross_tonnage
https://en.m.wikipedia.org/wiki/Tonnage

I think you cracked my case. The GT figure is the carrying capacity (a weight), determined by the internal volume of the vessel (including the crew's quarters). That's not exactly the same as the ship's mass. Howver, i found a PowerPoint from an industry conference that stated an average of 0.46 as the ratio of GT to LDT (for avg container) but didn't think it made sense at first if GT was volume based. I didn't realize there were multiple GT definitions. Also, I know SSW just scrapped a 4600 TEU vessel for $6.4m, which is why I think GT is too high to be the mass/displacement. The 0.46 coefficient helps me get close to the actual data point so I think I'm in good shape.

Hopefully I can get a hold of SSW on Tuesday and confirm. Good to know the industry lingo for when I do. Also, thanks for the heads up on other metals. I was assuming any non-steel mass would be trivial. I might be pm'ing you next week to confirm some stuff.

What guy decided to name all mass and volume definitions, "tonnage"?

I think long ton, but LDT is in mefric tons and they are close enough for an estimate
Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on December 26, 2016, 09:28:47 PM
https://en.m.wikipedia.org/wiki/Gross_tonnage
https://en.m.wikipedia.org/wiki/Tonnage

I think you cracked my case. The GT figure is the carrying capacity (a weight), determined by the internal volume of the vessel (including the crew's quarters). That's not exactly the same as the ship's mass. Howver, i found a PowerPoint from an industry conference that stated an average of 0.46 as the ratio of GT to LDT (for avg container) but didn't think it made sense at first if GT was volume based. I didn't realize there were multiple GT definitions. Also, I know SSW just scrapped a 4600 TEU vessel for $6.4m, which is why I think GT is too high to be the mass/displacement. The 0.46 coefficient helps me get close to the actual data point so I think I'm in good shape.

Hopefully I can get a hold of SSW on Tuesday and confirm. Good to know the industry lingo for when I do. Also, thanks for the heads up on other metals. I was assuming any non-steel mass would be trivial. I might be pm'ing you next week to confirm some stuff.

What guy decided to name all mass and volume definitions, "tonnage"?

I think long ton, but LDT is in mefric tons and they are close enough for an estimate

The tonnage & metric thing can get confusing.

Here in the GOM all the rigs talk standard "how many gallons/barrels of fuel/water/mud you got for me?"

Overseas instead of pumping 25,000 gallons of fuel, it's 95 cubes.

Personally I prefer metric (1000 gallons of fresh water = 1 cubic meter = 1 MT & for other liquids you multiple volume by specific gravity for weight) gotta know actual cargo weights for stability calcs.

I've never thought of salvage before...
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 27, 2016, 06:32:14 AM
Not to sidetrack your discussion guys but SSW jist bought 4 or 5 recent vintage ships of the 4500-5000 size.  They bought them at scrap prices and plan on putting them to work.  I lost the link - when I find it again I will post.  It was in one of the trade magazines.  SSW didn''t post it on their site or news release it.  It is non-material I guess.  Management is a little schizophrenic, but there may be some rationale in scrapping a ship and taking the tax loss on it, and then buying others on the cheap.

I have picked up a few shares on the cheap, well after my tax wash, and expect at least a 50% cut when they next announce the divdend (my smallest position in my portfolio)  I would like to see them turn EPS profitable, if it is possible. 
Saving 75 -100 mil. on the dividend would help.  I also expect alot more writedowns on their smaller, older fleet, still. 

Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on December 27, 2016, 06:58:01 AM
Not to sidetrack your discussion guys but SSW jist bought 4 or 5 recent vintage ships of the 4500-5000 size.  They bought them at scrap prices and plan on putting them to work.  I lost the link - when I find it again I will post.  It was in one of the trade magazines.  SSW didn''t post it on their site or news release it.  It is non-material I guess.  Management is a little schizophrenic, but there may be some rationale in scrapping a ship and taking the tax loss on it, and then buying others on the cheap.

I have picked up a few shares on the cheap, well after my tax wash, and expect at least a 50% cut when they next announce the divdend (my smallest position in my portfolio)  I would like to see them turn EPS profitable, if it is possible. 
Saving 75 -100 mil. on the dividend would help.  I also expect alot more writedowns on their smaller, older fleet, still.

Was it the MSC vessels (Carole, Veronique, Manu, and Leanne)? Looks like they bought them for $5m/vessel coming off bareboat charters. I know they had purchased 2 and were expected to purchase the other 2 in Nov or Dec. It was a pre-arranged deal but it's perfect timing. Seaspan Efficiency was just scrapped for $6.4m at slightly lower scrap rates so these vessels probably have excess value.
Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on December 27, 2016, 07:53:03 AM
I just noticed that the C Japan is only 6 years old.

Why would they scrap a practically new boat? Operational or maintenance issues?
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 27, 2016, 01:39:12 PM
Not to sidetrack your discussion guys but SSW jist bought 4 or 5 recent vintage ships of the 4500-5000 size.  They bought them at scrap prices and plan on putting them to work.  I lost the link - when I find it again I will post.  It was in one of the trade magazines.  SSW didn''t post it on their site or news release it.  It is non-material I guess.  Management is a little schizophrenic, but there may be some rationale in scrapping a ship and taking the tax loss on it, and then buying others on the cheap.

I have picked up a few shares on the cheap, well after my tax wash, and expect at least a 50% cut when they next announce the divdend (my smallest position in my portfolio)  I would like to see them turn EPS profitable, if it is possible. 
Saving 75 -100 mil. on the dividend would help.  I also expect alot more writedowns on their smaller, older fleet, still.

Was it the MSC vessels (Carole, Veronique, Manu, and Leanne)? Looks like they bought them for $5m/vessel coming off bareboat charters. I know they had purchased 2 and were expected to purchase the other 2 in Nov or Dec. It was a pre-arranged deal but it's perfect timing. Seaspan Efficiency was just scrapped for $6.4m at slightly lower scrap rates so these vessels probably have excess value.

Yes, that would be it.  tx..
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on December 27, 2016, 01:45:29 PM
I just noticed that the C Japan is only 6 years old.

Why would they scrap a practically new boat? Operational or maintenance issues?

They never said the reason.  I read that entire section of the Q filing, and went away thinking it was because they couldn't recharter it.  I could be confused. 

Your the ship driver. :-).   Would a company scrap a newish ship because it was defective?  Wouldn't it be warrantied? 
Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on December 27, 2016, 09:01:54 PM
I just noticed that the C Japan is only 6 years old.

Why would they scrap a practically new boat? Operational or maintenance issues?

They never said the reason.  I read that entire section of the Q filing, and went away thinking it was because they couldn't recharter it.  I could be confused. 

Your the ship driver. :-).   Would a company scrap a newish ship because it was defective?  Wouldn't it be warrantied?

Throughout the oil slump; as vessels came off contract, they get warm stacked (docked here in Fourchon with minimum manning) & if they don't get chartered within a few months, they get cold stacked at our shipyard facilities in either Houma, La Rose, Gulfport or Tampa.

HOS has cold stacked a lot of their vessels right here in Fourchon at their HOSPort facility.

The much larger vessels that Seaspan operates probably can't be stacked at just any old shoreside facility but could be anchord out somewhere (they'd need some minimum manning depending on the flag state requirements & those of the port state controlling authority for the anchorage.)

Could be they had operational performance issues (major upgrades or repairs) or they'd rather take quick cash from scrapping (sounds like a value destructive move but I'm not privy to how much cash the vessel returned above & beyond outflow...)
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 11, 2017, 06:45:48 AM
Dividend unchanged.  I am wrong so far.  They didn't hesitate to cut it in 2009. 

Holding 7500 shares.  May just make my money back. 
Title: Re: ATCO - Atlas Corp
Post by: watsa_is_a_randian_hero on January 11, 2017, 07:22:53 AM
Dividend unchanged.  I am wrong so far.  They didn't hesitate to cut it in 2009. 

Holding 7500 shares.  May just make my money back.

Is this indicative of the next 4 quarters?  Dont they re-evaluate annually? 
Title: Re: ATCO - Atlas Corp
Post by: doc75 on January 11, 2017, 07:43:51 AM
When asked about the dividend on the last CC, I though they said that they would re-evaluate in February... so I'm not sure one should read too much into no drop as-of-yet.
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on January 11, 2017, 09:22:24 AM
When asked about the dividend on the last CC, I though they said that they would re-evaluate in February... so I'm not sure one should read too much into no drop as-of-yet.

No.  I figured if they cut it significantly the stock would pop.  Its popped anyways.  Mostly I think it was pushed down due to tax loss selling.  Its been coming back since the new year. 

For my purposes I have neen treating it as if the dividend is already cut 50%.  Anything above that is found money AFAIK. 
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on January 11, 2017, 09:38:27 AM
I'd think they'd be best served cutting the dividend completely. Either way, if current conditions continued indefinitely, I think SSW is solvent (assuming newbuilds are locked in for 17 years at today's spot rate). Of the charter owners out there, they are the best positioned at the moment.

I think SSW's value is going to depend heavily on the charters for the newbuilds being delivered this year.
Title: Re: ATCO - Atlas Corp
Post by: doc75 on February 01, 2017, 12:14:32 PM
Anyone know what's going on with the 15% drop (and counting) today?

I know that they were going to revisit their dividend policy in February, but I haven't seen any news.
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on February 01, 2017, 04:02:12 PM
MS initiated coverage at $4.50 so probably that
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on February 01, 2017, 10:08:11 PM
Saw this on the SSW google finance page
https://www.fool.com/investing/2017/02/01/why-seaspan-corporation-stock-is-down-nearly-13.aspx
Title: Re: ATCO - Atlas Corp
Post by: Uccmal on February 02, 2017, 08:15:25 AM
Short attack?  Led by Morgan Stanley. 
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on February 02, 2017, 09:04:24 AM
Short attack?  Led by Morgan Stanley.

It kind of feels that way...

If anyone has access to the report can you please post it or send it to me?

Supposedly the report mentions that SSW will have cumulative red ink over the next few years. I can't figure any way to arrive at that conclusion unless they assume newbuilds meant for Hanjin will be idle. These are the only containership sizes with positive supply/demand trends.  Everything is based on these newbuild charter rates, which I'm becoming more bullish on since reading about China/Korean state-sponsored companies getting direct and implicit backing. China/Korea seem to be self-incentivized to support the shippers, which would protect SSW from insolvency. Their state-sponsored companies have so much more to lose than SSW. I like the incentives backing SSW's bull case.

Without knowing the details, I think MS is being overly conservative to the point of unrealistic. SSW actually looks really cheap as a distressed debt-like position. I see nearly 10%+ CAGR as a conservative outcome.
Title: Re: ATCO - Atlas Corp
Post by: xtreeq on March 07, 2017, 11:57:13 AM
Looks like insiders are selling
http://splash247.com/seaspans-top-names-1bn-share-exit-sparks-concern-container-shipping-prospects/
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on August 11, 2017, 04:57:00 AM
David Sokol is now chairman of Seaspan.....
The Board of Directors has appointed David Sokol, a member of the Board of Directors and Executive Committee of Seaspan, as Chairman of the Board. Concurrent with this change, Kyle Washington and Gerry Wang have both been recognized as Chairman Emeritus. Seaspan has promoted Peter Curtis to Executive Vice President and Chief Operating Officer. Mr. Curtis joined Seaspan in 2001 as Vice President to establish and lead our ship management function and has served as the Chief Operating Officer of the company since 2012
http://www.newswire.ca/news-releases/seaspan-announces-leadership-transition-637536363.html
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on January 04, 2018, 06:19:36 AM
I wonder what they have in the plan
First a 80m senior note deal, a new CEO
then the 250m preferred +warrant deal with FFH?
https://finance.yahoo.com/news/seaspan-announces-pricing-80-million-231100666.html

https://finance.yahoo.com/news/seaspan-announces-letter-intent-potential-213100040.html
"Seaspan Announces Letter of Intent for Potential $250 Million Unsecured 5.50% Debenture and Warrant Investment from Fairfax Financial Holdings Limited"
Title: Re: ATCO - Atlas Corp
Post by: gfp on March 14, 2018, 06:51:34 AM
https://www.wsj.com/articles/billionaire-raises-his-bet-on-containerships-1521009921

http://www.seaspancorp.com/press-release-post/press-release-122843/

(scroll down in second link to see announcement of a second $250m investment by Fairfax to be funded next January on similar/same terms as first debenture/warrant deal)
Title: Re: ATCO - Atlas Corp
Post by: petec on March 14, 2018, 08:58:49 AM
https://www.wsj.com/articles/billionaire-raises-his-bet-on-containerships-1521009921

http://www.seaspancorp.com/press-release-post/press-release-122843/

(scroll down in second link to see announcement of a second $250m investment by Fairfax to be funded next January on similar/same terms as first debenture/warrant deal)

Nice. For both!
Title: Re: ATCO - Atlas Corp
Post by: zippy1 on April 09, 2018, 03:17:20 PM
https://www.streetinsider.com/Corporate+News/Seaspan+%28SSW%29+Announces+Departure+of+CFO+David+Spivak/14036717.html
Quote
Seaspan Corporation (NYSE: SSW) announced today that David Spivak, Chief Financial Officer of Seaspan, has given notice that he is exercising his right to terminate his employment with Seaspan effective June 29, 2018 to pursue other opportunities. Mr. Spivak will continue in his current role until May 5, 2018, after which Mr. Ryan Courson will be appointed Chief Financial Officer and Mr. Spivak will continue with Seaspan as Special Advisor to the President and Chief Executive Officer through the end of June.

Mr. Courson joined Seaspan in March 2018 as Senior Vice President of Corporate Development. He played a significant role in Seaspan's recent acquisition of GCI, working closely with Mr. Chen, Mr. Spivak and other senior executives at Seaspan on all aspects of the transaction. Prior to joining Seaspan, Mr. Courson spent three years at Falcon Edge Capital, a diversified investment firm with over $3 billion in assets under management, where he focused on researching and investing in capital-intensive industrial companies in North America and Asia. Before that, Mr. Courson worked at Teton Capital, a private family office, as an investment professional and as acting CFO of Teton's largest investment, Davos Brands. While serving as acting CFO of Davos, Mr. Courson managed all aspects of financial planning and analysis, and worked closely with the company's executive team and Board of Directors to help guide strategy, organizational structure, strategic partnerships and other matters. Mr. Courson began his career working at Berkshire Hathaway, where he performed financial analysis and helped structure joint ventures with certain Berkshire portfolio companies and Asian counterparties. Mr. Courson, who is fluent in Mandarin, graduated Summa Cum Laude from Washington University in St. Louis, where he currently serves as a visiting professor.
Title: Re: ATCO - Atlas Corp
Post by: lessthaniv on May 03, 2018, 08:45:58 AM
Love hearing Sokol talk. He has huge presence.
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on July 03, 2018, 10:35:16 AM
any one have any insights as to what other areas Sokal may be researching when he mentions that there are some interesting opportunities in related businesses to Seaspan? 

would some of the next set of investments would aim to diversify the core business with some counter-cyclical exposure? 
Title: Re: ATCO - Atlas Corp
Post by: Saluki on July 03, 2018, 11:15:49 AM
IIRC he mentioned things like ports, warehouses and logistics management for their customers.  I wish the video of the speech was posted online because I didn't take notes :(
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on August 01, 2018, 04:47:17 PM
Quote
SEASPAN REPORTS FINANCIAL RESULTS FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 2018
Seaspan Achieves Strong Operating Results with the Successful Integration of GCI,
Growth of Operating Fleet, and
Increases Equity Capital through Fairfax’s Continued Investment and Support
Title: Re: ATCO - Atlas Corp
Post by: petec on August 03, 2018, 03:09:56 AM
Can someone with a brain help me out please. I'm confused about how many shares there are.

YE17 20F summary table shows 131m but notes show 117m diluted. That in itself is confusing.

Q1 release shows 134mdiluted  and clearly states the 1st tranche of 38.5m FFH warrants are antidilutive and not included.

Q2 shows 146m diluted and on the call they said that the first tranche of FFH warrants was included in that number since it is now dilutive.

How do you go from 134m to 146m by adding 38.5m?
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on September 20, 2018, 06:52:36 AM
filed yesterday:
https://www.sec.gov/Archives/edgar/data/1332639/000119312518277358/d616840dex33.htm

6,000,000 new pref shares @ 8% ... guess it's better than 10%

There must be an immediate need for the capital now?  Alternatively, does this tie into the new revolving facility, ie need for cash on hand?
Title: Re: ATCO - Atlas Corp
Post by: petec on September 20, 2018, 07:06:52 AM
filed yesterday:
https://www.sec.gov/Archives/edgar/data/1332639/000119312518277358/d616840dex33.htm

6,000,000 new pref shares @ 8% ... guess it's better than 10%

There must be an immediate need for the capital now?  Alternatively, does this tie into the new revolving facility, ie need for cash on hand?

Also announced repayment of loans on several vessels - may have something to do with that.
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on September 20, 2018, 07:50:58 AM
filed yesterday:
https://www.sec.gov/Archives/edgar/data/1332639/000119312518277358/d616840dex33.htm

6,000,000 new pref shares @ 8% ... guess it's better than 10%

There must be an immediate need for the capital now?  Alternatively, does this tie into the new revolving facility, ie need for cash on hand?

Also announced repayment of loans on several vessels - may have something to do with that.
guess the prefs are easier to manage than the revolvers and gets the company away from using "debt" ... not sure if it's cheaper, though?
Title: Re: ATCO - Atlas Corp
Post by: petec on September 20, 2018, 09:11:06 AM
No, nor me.

Amused at the reaction today on DB downgrade. The wall of cash is still coming, and a downturn would create great opportunities for Sokol.
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on September 20, 2018, 11:51:01 AM
Long-run, I bet SSW is right that there will be further consolidation, which they will probably benefit from. In the short-run, it does seem like margins are going to be impacted by IMO 2020 (assuming the industry does comply with regulations). Especially since SSW seems to have missed the boat on scrubber installs and will be forced to purchase lower-emission fuel or take the fines.
Title: Re: ATCO - Atlas Corp
Post by: petec on September 24, 2018, 03:04:51 AM
Long-run, I bet SSW is right that there will be further consolidation, which they will probably benefit from. In the short-run, it does seem like margins are going to be impacted by IMO 2020 (assuming the industry does comply with regulations). Especially since SSW seems to have missed the boat on scrubber installs and will be forced to purchase lower-emission fuel or take the fines.

Yes. This is something I’ve been meaning to do more work on. Do you have a feel for how significant these costs are going to be? I haven’t found managements’ comments on recent calls very helpful.
Title: Re: ATCO - Atlas Corp
Post by: Schwab711 on September 24, 2018, 06:11:45 AM
Long-run, I bet SSW is right that there will be further consolidation, which they will probably benefit from. In the short-run, it does seem like margins are going to be impacted by IMO 2020 (assuming the industry does comply with regulations). Especially since SSW seems to have missed the boat on scrubber installs and will be forced to purchase lower-emission fuel or take the fines.

Yes. This is something I’ve been meaning to do more work on. Do you have a feel for how significant these costs are going to be? I haven’t found managements’ comments on recent calls very helpful.

Not really yet. It seems like it will be a bigger deal than many first thought. I've been trying to figure it out across all vessels. I posted hoping someone would correct me. I think SSW planned to not comply and then most of their competitors made plans to comply so they are a bit gun-shy right now (and probably why they issued preferreds instead of debt).

Best I can tell, SSW will have to use low-sulfur bunker fuel for at least the first year or two on the large majority of their vessels (currently going for ~30% more than regular fuel).
Title: Re: ATCO - Atlas Corp
Post by: petec on September 24, 2018, 09:52:28 AM
Thanks. That’s useful.
Title: Re: ATCO - Atlas Corp
Post by: bizaro86 on September 24, 2018, 11:29:20 AM
I thought this piece on scrubbers was pretty helpful.

https://seekingalpha.com/article/4207153-2020-sulfur-cap-scrubbers-gain-favor
Title: Re: ATCO - Atlas Corp
Post by: petec on September 25, 2018, 02:18:59 AM
I thought this piece on scrubbers was pretty helpful.

https://seekingalpha.com/article/4207153-2020-sulfur-cap-scrubbers-gain-favor

Thanks-I find that quite compelling on the anti-scrubber side!
Title: Re: ATCO - Atlas Corp
Post by: John Hjorth on September 25, 2018, 02:28:08 PM
Perhaps a hint [I'm not sure, because I haven't searched or looked for it]. DFDS A/S [DFDS.CPH] ran a program for scrubber mods/retrofits for a part of their wessels a few years back. Perhaps you might find some comments about the economy in doing so in the DFDS financials a few years back - I would look at 2012 - 2016.

- - - o 0 o - - -

Please don't scrub my butt, if you find nothing!
Title: Re: ATCO - Atlas Corp
Post by: petec on October 26, 2018, 04:50:32 AM
This looks cheap to me.

7.5x ev/ebitda looks roughly right but the balance between equity and debt isn't. After an epic capex binge they are moving to almost zero growth capex and the fleet is young so maintenance capex is low. As a result it's moving towards free cash flow of $400-500m (depreciation alone will be nearly $300m). Depending on the share count you use (213-238 depending on how many warrants FFH exercise) that gives a free cash yield of 25-33% on the current share price. That value should accrue to equity as the company delevers, plus more as the cost of debt falls.

The cash flows are largely contracted for the next few years and then they are subject to contract rollovers. Some look to be above market, some below, but the market is tightening with a steady demand growth, deliveries dropping from 1.4m TEU in 2018 to 0.5m in each of 2020 and 2021 (per the 2q call), and a low order book. Clearly a collapse in global trade would be bad but I regard that as unlikely and it's worth noting that China-US is only 7% of global container traffic.

These cash flows go into the hands of a very able (and very incentivised - he's been given a ton of shares) hard asset capital allocator: David Sokol. If he can do anything smart with the money then the return to equity should be greater than the FCF yield. He has already made one $200m acquisition, Swiber, an oil services EPIC firm and vessel owner with a stake in an LNG-to-power plant. We will learn more about that on the next call.

The blot is the scrubber issue discussed above. The IMO confirmed a couple of days ago that stricter NOX emissions will be required from 2020. This impacts container economics via more capex (to fit scrubbers) or higher fuel costs and fines (if you don't fit scrubbers). I assume Seaspan will go down the capex route, reducing FCF temporarily, but I would also imagine that that investment will get reflected in contract rates as contracts roll. What I am not sure about is who bears the cost of low-sulphur fuel and fines from 2020 until the fleet is fully refitted. Fuel is generally passthrough, but I don't know if that applies in this situation. Can anyone help on this?

Any other thoughts?
 
Title: Re: ATCO - Atlas Corp
Post by: DooDiligence on October 26, 2018, 06:27:05 AM
Wow, I'm embarrassed to say that as a former mariner, I was not aware of the upcoming IMO scrubber compliance regs.

When you fire up a big set of C280-16 Cats they put out a ton of visible soot (less cylinders, no less soot emission.)
Visible soot disappears after they're warmed up, if the injectors are all good.

Others engines, like EMD's, continue to put out visible soot even after they're warmed up.

How much does it cost to install these things & who makes them?

Chief engineers already have to show records of matching S/N's for injectors in an actual installation or ABS will issue a non-conformity which could end up in the vessel losing its IOPP certificate (a SOLAS boat usually has 2 huge binders full of certificates.)

I've sent a message to the last Chief I worked with to ask about additional maintenance & to see if the company has started installing scrubbers (he's working on an ice class vessel in Antartica now.)

Companies which quickly got onboard with SOLAS requirements gained a foothold in the industry over lesser operators & this scrubber compliance issue will probably result in the same competitive advantage.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on October 30, 2018, 10:10:50 PM
Is this the Seaspan on this forum
https://www.seaspancorp.com/ir-dashboard/corporate-governance/directors-officers/

and is that the same company as this Seaspan based in vancouver?

https://www.seaspan.com/history

Thanks
Title: Re: ATCO - Atlas Corp
Post by: petec on October 30, 2018, 11:10:36 PM
Is this the Seaspan on this forum
https://www.seaspancorp.com/ir-dashboard/corporate-governance/directors-officers/

and is that the same company as this Seaspan based in vancouver?

https://www.seaspan.com/history

Thanks

Yes, the first link (Seaspan Corp) is the company discussed on this thread. No, the second link (Seaspan.com) is not the same company, but it is 100% owned by the Washington family who are a major shareholder in Seaspan Corp, so there’s a link.

Incidentally Seaspan Corp announced results last night. They look to be well ahead of consensus, and FCF came in at $120m, implying a huge yield.
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on October 31, 2018, 08:37:56 AM
Is this the Seaspan on this forum
https://www.seaspancorp.com/ir-dashboard/corporate-governance/directors-officers/

and is that the same company as this Seaspan based in vancouver?

https://www.seaspan.com/history

Thanks

Yes, the first link (Seaspan Corp) is the company discussed on this thread. No, the second link (Seaspan.com) is not the same company, but it is 100% owned by the Washington family who are a major shareholder in Seaspan Corp, so there’s a link.

Incidentally Seaspan Corp announced results last night. They look to be well ahead of consensus, and FCF came in at $120m, implying a huge yield.
numbers look good

overhang still there, but under Watsa's price seems to be a good deal when available, glad to see the stock picking up

some clarity on the pref share issuance was helpful, effectively swapping the 10% for 8% saves some money without changing cap structure...though I was under the impression they wanted to move to reduce debt than retain debt, but the working capital deficit matter needs to be addressed first most likely

we won't see better credit ratings until May/June 2019?
Title: Re: ATCO - Atlas Corp
Post by: petec on October 31, 2018, 01:36:31 PM
A boardmember pm'd me to ask whether there is a good reason this is so cheap. Here are a few thoughts:

1) It's not that cheap on EV/EBITDA, and arguably not even on earnings, given the quality of the industry (poor). If you screen on those metrics it might not stand out. It's only truly cheap on p/FCF, and...

2)...I don't think the market has really realised how powerful FCF generation is going to be. Even on today's call one analyst admitted surprise that quarterly free cash annualised out at $500m, said that was too aggressive as a forecast, and asked if they plan to generate FCF in the future and if so whether $200m might be a reasonable figure. This suggests a total misunderstanding of what's happening. Q3 was the first quarter with the full contribution from the GCI acquisitions and the last of the newbuilds (delivered in May). Therefore the next several quarters should look very similar: full cash flow contribution from all vessels and no capex, because they aren't ordering newbuilds any more (note that operating cash flow is after the drydock costs to maintain the existing fleet). So annualised FCF is quite likely to get close to $500m, but it doesn't seem like the market has realised it yet. That's forgivable because...

3)...the Seaspan story is complicated. It's been a jam tomorrow story for years, it got overlevered, there's been wholesale management change, and then there's been the FFH warrant dilution to wrap your head around. It's understandable that plenty of people got bored/annoyed and looked away just as the free cash flow tap got turned on.

4) Although there's a lot of contracted revenue, contracts do roll over, and people have been panicking that the US/China trade war and possible general economic slowdown would hurt recontracting rates. The call is worth listening to on this but the basic points are that demand is growing, supply is slowing, both the idle fleet and the order book are at multidecade lows, consolidation of container companies has driven better supply discipline, and charter rates are trending gently up. Seaspan signed new contracts and contract extensions on good terms in the quarter and higher charter rates have driven about $20m in incremental revenue YTD, which is significant when you consider only 10% of their revenues are uncontracted.

I think this share will do very well over time as people realise the massive change from borrowing to build, to generating FCF and delevering. In addition I expect some smart capital allocation moves. There is one caveat, which is that the FCF is after drydock costs to maintain the existing fleet, but ships do have finite lives (30 years) so the fleet does actually have to be replaced over time. But the fleet is young today so this is not something I'm worried about. If it worries you, value the stock on earnings not FCF. Notably they have said they won't order newbuilds just to extend the life of the fleet, but only if the returns warrant it. They'd rather run the existing fleet off than reinvest the cash flows at subpar rates, which is smart.

Incremental positives on the call, for me, were:
- the addition of 2 new customers on "innovative" contracts and the extension of several existing contracts on good terms. Details will apparently be in a 6K later this week.
- Swiber will be debt free when they buy 80% of it for $20m. Apparently the term sheet is public but I can't find it.
- Scrubbers will either be paid for by customers - either customers will fund the capex or Seaspan will earn a return on the capex. I suspected this but wasn't sure.

I expect to see quite a lot of debt management activity as they delever, which should result in better maturity laddering and lower debt cost which has the potential to meaningfully juice earnings and FCF. I also expect to see either accretive acquisitions or buybacks once the maturities have been sorted out.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on October 31, 2018, 02:09:05 PM
A boardmember pm'd me to ask whether there is a good reason this is so cheap. Here are a few thoughts:

1) It's not that cheap on EV/EBITDA, and arguably not even on earnings, given the quality of the industry (poor). If you screen on those metrics it might not stand out. It's only truly cheap on p/FCF, and...

2)...I don't think the market has really realised how powerful FCF generation is going to be. Even on today's call one analyst admitted surprise that quarterly free cash annualised out at $500m, said that was too aggressive as a forecast, and asked if they plan to generate FCF in the future and if so whether $200m might be a reasonable figure. This suggests a total misunderstanding of what's happening. Q3 was the first quarter with the full contribution from the GCI acquisitions and the last of the newbuilds (delivered in May). Therefore the next several quarters should look very similar: full cash flow contribution from all vessels and no capex, because they aren't ordering newbuilds any more (note that operating cash flow is after the drydock costs to maintain the existing fleet). So annualised FCF is quite likely to get close to $500m, but it doesn't seem like the market has realised it yet. That's forgivable because...

3)...the Seaspan story is complicated. It's been a jam tomorrow story for years, it got overlevered, there's been wholesale management change, and then there's been the FFH warrant dilution to wrap your head around. It's understandable that plenty of people got bored/annoyed and looked away just as the free cash flow tap got turned on.

4) Although there's a lot of contracted revenue, contracts do roll over, and people have been panicking that the US/China trade war and possible general economic slowdown would hurt recontracting rates. The call is worth listening to on this but the basic points are that demand is growing, supply is slowing, both the idle fleet and the order book are at multidecade lows, consolidation of container companies has driven better supply discipline, and charter rates are trending gently up. Seaspan signed new contracts and contract extensions on good terms in the quarter and higher charter rates have driven about $20m in incremental revenue YTD, which is significant when you consider only 10% of their revenues are uncontracted.

I think this share will do very well over time as people realise the massive change from borrowing to build, to generating FCF and delevering. In addition I expect some smart capital allocation moves. There is one caveat, which is that the FCF is after drydock costs to maintain the existing fleet, but ships do have finite lives (30 years) so the fleet does actually have to be replaced over time. But the fleet is young today so this is not something I'm worried about. If it worries you, value the stock on earnings not FCF. Notably they have said they won't order newbuilds just to extend the life of the fleet, but only if the returns warrant it. They'd rather run the existing fleet off than reinvest the cash flows at subpar rates, which is smart.

Incremental positives on the call, for me, were:
- the addition of 2 new customers on "innovative" contracts and the extension of several existing contracts on good terms. Details will apparently be in a 6K later this week.
- Swiber will be debt free when they buy 80% of it for $20m. Apparently the term sheet is public but I can't find it.
- Scrubbers will either be paid for by customers - either customers will fund the capex or Seaspan will earn a return on the capex. I suspected this but wasn't sure.

I expect to see quite a lot of debt management activity as they delever, which should result in better maturity laddering and lower debt cost which has the potential to meaningfully juice earnings and FCF. I also expect to see either accretive acquisitions or buybacks once the maturities have been sorted out.

Thanks ! 
Do you expect them to raise dividends?  I will listen to the CC after my kid goes to sleep!
Title: Re: ATCO - Atlas Corp
Post by: petec on October 31, 2018, 02:53:00 PM
No, they have clearly stated they will not raise the divi. This thing is about delevering and redeploying intelligently.

Title: Re: ATCO - Atlas Corp
Post by: petec on November 05, 2018, 02:08:06 PM
https://en.globes.co.il/en/article-hk-shipping-firm-seaspan-raising-nis-450m-debt-in-tel-aviv-1001259153
Title: Re: ATCO - Atlas Corp
Post by: petec on January 18, 2019, 12:48:43 PM
Seaspan has just taken the second tranche of Fairfax’s investment: $250m in warrants, immediately exercised at $6.50 per share, and $250m in debt due 2026.

This takes Fairfax’s investment to $1bn in total, split 50/50 debt/equity. They have 36% of the company. Seaspan’s share count goes to 213m for a market cap of $1.9bn and a 25% free cash yield.

Seaspan also announced it’s paid off the debt on another 8 ships taking the total to 32.
Title: Re: ATCO - Atlas Corp
Post by: Scunny Bunny on January 24, 2019, 09:30:19 PM
Dennis Washington filed on 18 January to sell entire 52.8m share stake (~25% of company). Interesting given share price & willingness to support back in 2009.
Title: Re: ATCO - Atlas Corp
Post by: petec on January 24, 2019, 10:09:48 PM
Dennis Washington filed on 18 January to sell entire 52.8m share stake (~25% of company). Interesting given share price & willingness to support back in 2009.

Yes, saw that. It’s a shelf filing so it will be interesting to see what they actually sell. I e no idea why (unless they’re just pissed at being diluted at silly prices by Fairfax!) Will be interesting to see if SSW can comment on the call. I wonder if Fairfax will be able to restrain themselves...
Title: Re: ATCO - Atlas Corp
Post by: Saluki on April 19, 2019, 06:03:40 AM
I'm a SSW shareholder and fan of David Sokol, so I don't know how I missed this interview being posted, but here it is....enjoy!

https://www.youtube.com/watch?v=ydMfjXf5X8Y
Title: Re: ATCO - Atlas Corp
Post by: Parsad on April 19, 2019, 10:04:03 AM
I'm a SSW shareholder and fan of David Sokol, so I don't know how I missed this interview being posted, but here it is....enjoy!

https://www.youtube.com/watch?v=ydMfjXf5X8Y

You should come to the Fairfax AGM...we had terrific access to David for a couple of days.  He's becoming one of the highlights of the week each year now!  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Saluki on April 19, 2019, 01:53:45 PM
Parsad, A couple of years ago I went to the Value Investing Conference as a reward to myself for hitting accredited investor status. I wanted to meet Arnold Van Dem Berg and Mohnish Pabrai both of whom I greatly admire.  It was there that I heard about COBF and the Fairfax AGM (Yes, I didn't know the Fairfax meeting was the following day and I was scheduled to fly out that morning, that's how naive I was).  I went back last year and had a blast though.   

I was going to go this year, but I dislike travelling too much and I have to go to NYC next week and Chicago next month and Baltimore the month after that, so I decided to skip this year, unfortunately.  I plan to attend next year again though :)
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on May 02, 2019, 01:18:43 PM
Figured this should have its own thread since ppl are discussing elsewhere

Seaspan posted earnings...good numbers!
Title: Re: ATCO - Atlas Corp
Post by: petec on May 02, 2019, 02:42:53 PM
It already does! Could you post there?
Title: Re: ATCO - Atlas Corp
Post by: gfp on May 02, 2019, 06:45:58 PM
Threads can be hard to find without google.  I'll help:
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ssw-seaspan/500/
Title: Re: ATCO - Atlas Corp
Post by: Parsad on May 02, 2019, 11:38:37 PM
Threads can be hard to find without google.  I'll help:
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ssw-seaspan/500/

For the "Investment" Board, finding topics are easy, that's why we have the titles exactly the same.  Click on "Subject" and it will put everything in "Investments" into numerical first, then alphabetical order...simply go to the ticker by clicking on the page number.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on May 16, 2019, 07:52:05 AM
The next stage in equity value creation has begun: $1bn secured financing facility just announced, part term loan, part revolved, and expandable to $2bn if needed. Replaces 12 existing secured facilities at a "meaningfully lower rate". 
Title: Re: ATCO - Atlas Corp
Post by: Saluki on May 16, 2019, 08:15:52 AM
This is big news.  Their priority has been restructuring the debt and getting themselves to an investment grade credit rating so they can expand or take advantage of opportunistic acquisitions when they come up.  If this trade war nonsense continues, some other shippers may be willing to unload assets to whoever is sitting around with access to cash.
Title: Re: ATCO - Atlas Corp
Post by: petec on May 16, 2019, 09:09:33 AM
Agreed. I'm not sure the annual interest savings will be huge in the context of the cash flow the company is generating, but the bigger point is the direction of travel is superb and the capital availability if they see opportunities is rising.
Title: Re: ATCO - Atlas Corp
Post by: walkie518 on September 09, 2019, 12:02:32 PM
up nearly 5% on no news other than one new ship? 

not complaining but is there something I'm missing?
Title: Re: ATCO - Atlas Corp
Post by: Liberty on September 09, 2019, 12:55:44 PM
up nearly 5% on no news other than one new ship? 

not complaining but is there something I'm missing?

Might be because of the rotation going on right now. Anything that has done well in the past year (factor: momentum) is down and most of the things that have done badly (factor: value) are up today.
Title: Re: ATCO - Atlas Corp
Post by: kab60 on September 09, 2019, 01:04:40 PM
up nearly 5% on no news other than one new ship? 

not complaining but is there something I'm missing?

Might be because of the rotation going on right now. Anything that has done well in the past year (factor: momentum) is down and most of the things that have done badly (factor: value) are up today.
That would explain why my portfolio is (finally) having a blast!
Title: Re: ATCO - Atlas Corp
Post by: gary17 on September 09, 2019, 01:07:46 PM
peanuts compare to fnma LOL
Title: Re: ATCO - Atlas Corp
Post by: Parsad on September 09, 2019, 01:55:59 PM
up nearly 5% on no news other than one new ship? 

not complaining but is there something I'm missing?

Might be because of the rotation going on right now. Anything that has done well in the past year (factor: momentum) is down and most of the things that have done badly (factor: value) are up today.

Absolutely!  It had to happen eventually and value stocks are benefiting today.  Hopefully, this is a longer-term prognosis!  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Viking on November 07, 2019, 04:09:36 PM
Seaspan reported Q3 results this morning and they were...... perfectly boring. A few take-aways:
1.) industry consolidation: there has been considerable consolidation (currently 10 participants carry 90% of global container trade down from 150 participants) and existing players are acting much more rationally. (I think investors are missing this point :-)
2.) currently very favourable demand/supply dynamics set to continue into 2020: supply is constrained (especially for larger vessels) and order book for new vessels is at historic lows. This bodes well for pricing moving forward (higher :-).
3.) Seaspan has executed on its plan to significantly pay down debt and increase equity (hit debt to equity target of 1X). It has also implemented a $1.5 billion portfolio financing program (to repay five secured credit facilities, for general corporate purposes, and may be used in part to finance the acquisition of vessels). It would not surprise me to see Seaspan get more aggressive on the acquisition front over the next year (but in a very disciplined way).

This is Fairfax's largest investment (shares, warrants, debt). It has been a great investment so far and could be another home run. Lot's of nice tailwinds. They also have an Investor Day planned for Nov 22... will be interesting to see what they have planned.

Q3 Results: https://www.seaspancorp.com/events-presentations/

A few quotes from the call:

Bing Chen (Seaspan President and Chief Executive Officer): "...We also announced the acquisition of a 9600 TEU vessel which will be put on a 3-year time charter with our partner ONE delivered. We are happy to continue to grow our fleet and pursuing accretive acquisitions. We see increasing attractive opportunities among our network of partners and remain very focused on fee growth at the right price. We see growing opportunities to broaden and deepen our customer partnership as our sector stabilizes into a new normal marked by consolidation and we expect our momentum to continue throughout the remainder of the year.
------------------
Ari Rosa (Bank of America): Hi, good morning guys. So I wanted to ask with the order book (for new vessels) at historically low levels and I thought that was a really helpful chart. How long do you think it can stay there given what you described is a pretty tight supply environment.

Peter Curtis (Seaspan Executive Vice President): That's a good question thanks very much. I think really what has changed over the years is the fact that they have -- there's been a maturation in the market in the container market. We have come from over 150 participants to a situation where the top 10 carry 90% of global container trade. Through the last 10 years there's been a very much increased degree of discipline among our customers not only among the customers but they work in primarily alliances. We are in the forecasting and determination of new tonnage is -- against the background of the projected needs. So the world of speculative construction and ordering I think is something that is relatively one that has gone by.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on November 21, 2019, 05:51:17 AM
Seaspan enters the energy business, and possibly asset management business.  Diversifying into energy, with one of the best energy executives in the last 50 years and changing its name to Atlas Corp:

https://finance.yahoo.com/news/seaspan-announces-proposed-holding-company-120000393.html

Bing Chen will remain CEO and David will remain Chairman. 

I know that David was investing alot of his family capital through his family holding company, but I think this will be the main vessel (pardon the pun) now.
 Imagine what Berkshire might have looked like if Sokol had been given the reins eventually instead of being terminated!  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on November 21, 2019, 08:20:30 AM
This is what I've been patiently waiting for, Mid-American 2.0 here we come!

Hopefully tomorrow we get a lot more detail but this should help reduce the cyclicality of the business as well as tie in nicely if they ever get the Swiber deal to go through.
Title: Re: ATCO - Atlas Corp
Post by: wondering on November 21, 2019, 09:54:37 AM
Seaspan enters the energy business, and possibly asset management business.  Diversifying into energy, with one of the best energy executives in the last 50 years and changing its name to Atlas Corp:

https://finance.yahoo.com/news/seaspan-announces-proposed-holding-company-120000393.html

Bing Chen will remain CEO and David will remain Chairman. 

I know that David was investing alot of his family capital through his family holding company, but I think this will be the main vessel (pardon the pun) now.
 Imagine what Berkshire might have looked like if Sokol had been given the reins eventually instead of being terminated!  Cheers!

Perhaps this the proposed disposition that Paul Rivett was hinting at in the last few conference calls.

I have a question that will reveal my ignorance

The deal is that APR is purchased by Atlas in an "all-stock transaction valued at $750 million including the assumption of debt, for an expected equity value at closing of approximately $425 million"

According to the FFH 2018 annual report, in Prem's letter, APR had a cost of $340m.

Is Fairfax's gain on disposition of APR

a) $410m (750 - 340)
b) $85m (425 -340)
c) unknown or maybe no gain at all?

And since this is a non-cash transaction, I would imagine that the offsetting accounting entry would be that Fairfax's investment in Seaspan would increase by the capital gain.


Title: Re: ATCO - Atlas Corp
Post by: petec on November 21, 2019, 12:23:20 PM
Seaspan enters the energy business, and possibly asset management business.  Diversifying into energy, with one of the best energy executives in the last 50 years and changing its name to Atlas Corp:

https://finance.yahoo.com/news/seaspan-announces-proposed-holding-company-120000393.html

Bing Chen will remain CEO and David will remain Chairman. 

I know that David was investing alot of his family capital through his family holding company, but I think this will be the main vessel (pardon the pun) now.
 Imagine what Berkshire might have looked like if Sokol had been given the reins eventually instead of being terminated!  Cheers!

Perhaps this the proposed disposition that Paul Rivett was hinting at in the last few conference calls.

I have a question that will reveal my ignorance

The deal is that APR is purchased by Atlas in an "all-stock transaction valued at $750 million including the assumption of debt, for an expected equity value at closing of approximately $425 million"

According to the FFH 2018 annual report, in Prem's letter, APR had a cost of $340m.

Is Fairfax's gain on disposition of APR

a) $410m (750 - 340)
b) $85m (425 -340)
c) unknown or maybe no gain at all?

And since this is a non-cash transaction, I would imagine that the offsetting accounting entry would be that Fairfax's investment in Seaspan would increase by the capital gain.

B, I believe, and Fairfax’s investment in SSW will rise by $425m because that’s the value of the SSW shares they get as I read it (the rest of the value being SSW’s assumption of APR’s debt).

Edit - I may be wrong. APR was on the books for $298m at YE18 but I don’t think Fairfax owns all of APR equity so FFH may not get all the $425.

SSW is now a *huge* position for Fairfax.
Title: Re: ATCO - Atlas Corp
Post by: mranski on November 21, 2019, 02:44:37 PM
Re Sokol/Berkshire Sanjeev, he was suspected of insider trading and misleading buffett, I’m glad he isn’t there.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on November 21, 2019, 04:51:33 PM
Re Sokol/Berkshire Sanjeev, he was suspected of insider trading and misleading buffett, I’m glad he isn’t there.

Two sides to every story.  For 15 years, Buffett also said that Ajit Jain and David Sokol were the two people who have done the most for Berkshire shareholders and most likely to lead the company.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on November 21, 2019, 05:22:19 PM
Re Sokol/Berkshire Sanjeev, he was suspected of insider trading and misleading buffett, I’m glad he isn’t there.

Two sides to every story.  For 15 years, Buffett also said that Ajit Jain and David Sokol were the two people who have done the most for Berkshire shareholders and most likely to lead the company.  Cheers!

My understanding was that Sokol found a company, (I believe it was Lubrizol) that he knew would be the type of company Berkshire would want to own. He purchased some shares then a short time later mentioned the company to Buffett which as it turns out was exactly the type of company Buffett was interested in and Buffett proceeded to make an offer to buy the company delivering a great business to Berkshire and a quick tidy profit to Sokol.

Sokol had seen Munger buy BYD years earlier through Li Lu's fund and then Munger recommend that company to Buffett which they then invested in, so Sokol believed that this behaviour would not be seen as disreputable as he had seen Munger do what he thought was an analogous act.

The differences I guess were that Buffett only bought a piece of BYD so it did not do anything to change Munger's stake in the long term while it did for Lubrizol because he bought out all shareholders including Sokol.

The other difference was Charlie had owned BYD for years and years while Sokol had only recently bought his Lubrizol shares therefore giving the whiff of insider trading. The optics were not great.

Berkshire being the exemplar of corporate governance had no choice but to let Sokol go in order to keep that reputation.

Here's Munger describing what happened for those unfamiliar. https://www.youtube.com/watch?v=72t7oapvbas
Title: Re: ATCO - Atlas Corp
Post by: gary17 on November 21, 2019, 05:54:19 PM
If Sokol had simply said to Buffett “by the way, just do you know and full disclosure... i own...”. then the problem would not have been there.   I just don’t see how someone in his role and level of intelligence did not clue into that. 
Title: Re: ATCO - Atlas Corp
Post by: Gregmal on November 21, 2019, 06:10:21 PM
Well, just another example of Buffett arguably being a hypocrite(see the Munger BYD example) and worrying about things other than maximizing value for shareholders...

I guess when you get to his age its all about legacy and how people perceive you.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on November 21, 2019, 07:23:44 PM
Well, just another example of Buffett arguably being a hypocrite(see the Munger BYD example) and worrying about things other than maximizing value for shareholders...

I guess when you get to his age its all about legacy and how people perceive you.

not the same IMO because Munger likely told Buffett he owned BYD.  Sokol didn’t disclose
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on November 22, 2019, 04:07:52 AM
Well, just another example of Buffett arguably being a hypocrite(see the Munger BYD example) and worrying about things other than maximizing value for shareholders...

I guess when you get to his age its all about legacy and how people perceive you.

not the same IMO because Munger likely told Buffett he owned BYD.  Sokol didn’t disclose

Sokol actually did disclose; it was the first thing he said to Buffett about this company. Sokol upon originally mentioning it to Buffett said "I own shares in this company, and you may find it an interesting acquisition target." That was what was so puzzling about that situation and why I personally agree that Sokol was unfairly maligned.

It was reported at the time, and Buffett confirmed, that upon originally mentioning Lubrizol to Buffett Sokol said, "I own shares in this company." That is why, to me, it was completely unfair what Buffett later did to Sokol. Buffett went on to say, that he didn't know that an investment banker had originally brought the idea to Sokol. Which Sokol says is true, but that investment bankers brought him many deals and he only recommended those that he thought were good ideas, so it doesn't really matter where the idea originated (that is Sokol's take). Sokol said something like the following: an investment banker from JP Morgan mentioned it, he liked the company so he bought shares, he also thought it was a good idea for Berkshire to acquire, and he frequently brought acquisition ideas to Buffett - and Buffett rejected almost all of them. But he brought this one to Buffett, just like he regularly did, and said "I own shares of this company and it may be a good acquisition for Buffett." For tax reasons, Sokol actually sold some of his Lubrizol after that but then also resumed buying shares again.

As Buffett acknowledges, the dollar amounts in question were very small in relation to Sokol's net worth. And in light of Sokol turning down sums from Berkshire that could have aggrandized his net worth further, I find it odd that Sokol was shown the undercarriage of the bus so thoroughly.

The article below doesn't say it, but it implies that Sokol told Buffett he owns shares, because Buffett says, "I should have pressed Sokol more on his share ownership." Other articles relate the facts above as I have outlaid them. Given all of that, I think the thought that Sokol was a "crook" who deceived Buffett to make a few thousand dollars and did something unethical and possibly illegal - which is how Buffett portrayed this - is ridiculous. He told Buffett he owned shares of a company that may be a good acquisition for Berkshire.

https://www.reuters.com/article/us-berkshire/buffett-admits-error-says-sokol-events-inexcusable-idUSTRE73T06920110430
Title: Re: ATCO - Atlas Corp
Post by: gfp on November 22, 2019, 04:42:35 AM
The audit committee released a very detailed report at the time -
http://online.wsj.com/public/resources/documents/Berk_Board.pdf

Quote
Mr. Sokol mentioned that he owned the stock. He did not disclose:
 

the amounts and timing of his purchases;
the fact that he bought the shares after discussing Lubrizol with Citi and
after Mr. Sokol had narrowed the bankers’ initial list of 18 chemicals companies to one, namely Lubrizol;
the fact that Mr. Sokol had bought shares after Mr. Sokol (acting as a senior representative of Berkshire Hathaway scouting acquisition candidates) had asked for Citi’s help arranging a meeting with Lubrizol’s CEO to discuss Lubrizol and Berkshire; and
4
 the fact that Mr. Sokol bought shares after learning that Citi had discussed his request for a meeting with Lubrizol’s CEO, who told Citi that he would discuss Berkshire Hathaway’s possible interest in a transaction with the Lubrizol board.
It did not cross Mr. Buffett’s mind at that time that Mr. Sokol might have bought Lubrizol shares after seeking through investment bankers to initiate discussions with Lubrizol concerning a possible Berkshire Hathaway acquisition of Lubrizol. Because Mr. Sokol’s comment about owning the shares was in response to Mr. Buffett’s question how Mr. Sokol had come to know the company, it implied that Mr. Sokol had been following Lubrizol as an owner of its shares, and in that way came to think of Lubrizol as a possible Berkshire Hathaway acquisition.

Quote
At Mr. Buffett’s request, Berkshire Hathaway CFO Marc Hamburg phoned Mr. Sokol on March 15. Mr. Hamburg asked Mr. Sokol for the details of his Lubrizol stockholdings. Mr. Sokol provided the dates and amounts of his Lubrizol purchases. Mr. Hamburg also asked about Citi’s role in introducing Mr. Sokol to Lubrizol. Mr. Sokol answered that he thought he had called a banker he knew at Citi to get Mr. Hambrick’s phone number. When Mr. Hamburg commented that it sounded as if the banker must have exaggerated his role when he spoke with his colleagues, Mr. Sokol did not contradict him.

The gist is that Sokol wanted to resign before it happened and did so once the story broke.  He didn't violate any actual insider trading laws, most likely, but did in fact violate Berkshire's company policy - which is more strict.  He was not forthcoming to Mr. Buffett and especially Mr. Hamburg and this caused Warren to make false statements publicly.  Warren does not like these types of surprises.  The entire report above is a decent read and is very thorough.

* here is Mr. Buffett's initial press release on Mr. Sokol's resignation: https://berkshirehathaway.com/news/mar3011.pdf
Title: Re: ATCO - Atlas Corp
Post by: Cigarbutt on November 22, 2019, 05:28:29 AM
The audit committee released a very detailed report at the time -
http://online.wsj.com/public/resources/documents/Berk_Board.pdf
..
The gist is that Sokol wanted to resign before it happened and did so once the story broke.  He didn't violate any actual insider trading laws, most likely, but did in fact violate Berkshire's company policy - which is more strict.  He was not forthcoming to Mr. Buffett and especially Mr. Hamburg and this caused Warren to make false statements publicly.  Warren does not like these type of surprises.  The entire report above is a decent read and is very thorough.
Thanks. That's a very helpful input in forming a more definitive conclusion which is relevant for the Seaspan discussion.
I infer your opinion on the topic by your selective and differentiating use of first name, 'Mr.' and last name in the above paragraph and I come to a similar conclusion.
Making sure that one's conduct is appropriate requires that one stays away from legal limits and the margin of safety necessary implies ethical lines that should not be crossed. In business behavior and otherwise, it appears that the slope becomes slippery at some thresholds and non-linear changes can occur once the duty of candor is breached.
It must have been a tough decision and this ended up a lose-lose situation.
Title: Re: ATCO - Atlas Corp
Post by: sleepydragon on November 22, 2019, 07:04:35 AM
Didn’t he sell immediately after convincing BRK to buy?
Or he bought shortly right before he made the pitch to Buffett.

That’s a clear violation of compliance rules at any asset management firm.
Title: Re: ATCO - Atlas Corp
Post by: sleepydragon on November 22, 2019, 07:05:40 AM
If he did this at any investment bank, he will he fired immediately for cause and zero deferred payments.
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on November 22, 2019, 08:12:05 AM
The audit committee released a very detailed report at the time -
http://online.wsj.com/public/resources/documents/Berk_Board.pdf
..
The gist is that Sokol wanted to resign before it happened and did so once the story broke.  He didn't violate any actual insider trading laws, most likely, but did in fact violate Berkshire's company policy - which is more strict.  He was not forthcoming to Mr. Buffett and especially Mr. Hamburg and this caused Warren to make false statements publicly.  Warren does not like these type of surprises.  The entire report above is a decent read and is very thorough.
Thanks. That's a very helpful input in forming a more definitive conclusion which is relevant for the Seaspan discussion.
I infer your opinion on the topic by your selective and differentiating use of first name, 'Mr.' and last name in the above paragraph and I come to a similar conclusion.
Making sure that one's conduct is appropriate requires that one stays away from legal limits and the margin of safety necessary implies ethical lines that should not be crossed. In business behavior and otherwise, it appears that the slope becomes slippery at some thresholds and non-linear changes can occur once the duty of candor is breached.
It must have been a tough decision and this ended up a lose-lose situation.

It is worth noting the Sokol believes that this report was crafted simply to back up the view that Buffett eventually adopted that Sokol did something wrong. It is not an objective report, in this view, and materially angles the facts in a way that creates a misleading, poor impression of Sokol and his actions.

The only point is that, to me, it is far from clear that Sokol did anything wrong. Obviously, Buffett thinks he did, but I think there is a lot to show too that Sokol got a bad rap from this.
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on November 22, 2019, 03:35:31 PM
Wow a 3.5 hour investor call today what an event. I particularly enjoyed the context that was given to how they are diversifying into an asset management company instead of pure container shipping.

Sounds like the bankruptcy process in Singapore for Swiber is still dragging along and that it may take some more time. Overall I really enjoyed hearing the Q&As and found the discussion enlightening.

Anyone else have any thoughts on the investor day?
Title: Re: ATCO - Atlas Corp
Post by: Viking on November 22, 2019, 07:27:31 PM
Anyone else have any thoughts on the investor day?

I was a little surprised at how analysts appeared genuinely surprised/annoyed with the APR aquisition and the company reorganization (Atlas with two subs - Seaspan and APR) and rebranding (as infrastructure company). It appears to me analysts were getting comfortable with Seaspan’s transformation the past 2 years and they are now struggling to understand how to analyze the company moving forward. It will be interesting to see if shareholders decide to exit (sell shares) in the coming weeks or if they decide they like what the company is doing.

Atlas will be looking to add a third infrastructure type business in the next 12-24 months.

Sokol said post APR aquisition the ownership split on common shares with be as follows:
1.) Fairfax = 41%
2.) Washington Family = 22 or 23%
3.) management/board = 5%

APR was purchased by Seaspan at slightly under 5X 2020 EBITDA. EBITDA is expected to be about $150 million in 2020. It sounds to me that APR will do much better moving forward at Atlas than if it had remained at Fairfax. The senior people at Atlas will be able to help APR improve their balance sheet and also with strategy to drive business forward. Perhaps Fairfax also saw this benefit and that is why they were ok with the sale and taking shares in Atlas/Seaspan as payment (versus cash).

Bottom line, it will be interesting to follow Seaspan/Atlas moving forward. It has become Fairfax’s largest single investment.
Title: Re: ATCO - Atlas Corp
Post by: Viking on November 22, 2019, 11:02:06 PM
Regarding APR Energy, here is some information from old Fairfax reports. Looks to me like a good decision to move to Seaspan at a fair price where it will get more support and have a much better chance to grow.

1.) from Fairfax 2018 AR: “APR Energy. APR, based in Jacksonville, Florida is the world’s largest provider of fast track mobile turbine power. Founded by John Campion in 2004, APR has installed and operated over 5GW of power plants, ranging from 15MW to 360MW in size, and has grown its fleet to 1.9GW. APR’s proposition is speed of execution and reliability of power. At one point during the recent crisis in Puerto Rico, APR was the only large scale source of power on the island, with full deployment in just over 30 days. Fairfax led the take private of APR in January 2016, investing a total of $340 million at a valuation of 0.5x net tangible assets. Since Q1 2016, APR’s fleet utilization has increased from 44% to 74% and net debt has been reduced from $600 million to $360 million. The sustainability of earnings has also improved, with 56% of fiscal 2019 budgeted EBITDA driven by a 350MW contract in Argentina and a 360MW contract in Bangladesh (these are both five-year contracts). Going forward APR will continue to position itself as a specialty turbine fast track power company.”

2.) From Q2 2017 Report: “On July 20, 2017, the company increased its indirect equity interest in APR Energy plc ("APR Energy") to 67.9% through the acquisition of an additional 22.9% indirect equity interest for purchase consideration of $109.0 million and commenced consolidating APR Energy in the Other reporting segment. APR Energy is a provider of mobile power generation solutions.”
Title: Re: ATCO - Atlas Corp
Post by: muscleman on November 23, 2019, 08:23:49 AM
What's the multiple they paid for airplane leasing?
I did some rough research and it seems like some public air leasing companies are trading at 7-8x P/E.
Do they expect a lot of growth from this?
Title: Re: ATCO - Atlas Corp
Post by: petec on November 23, 2019, 09:54:36 AM
What's the multiple they paid for airplane leasing?
I did some rough research and it seems like some public air leasing companies are trading at 7-8x P/E.
Do they expect a lot of growth from this?

Seaspan doesn’t do airplane leasing - who are you referring to?
Title: Re: ATCO - Atlas Corp
Post by: NoCalledStrikes on November 23, 2019, 03:05:18 PM
A little late to the Lubrizol subthread... What I always thought was the final straw for Sokol  was his disastrous CNBC interview after the disclosure that he bought 100,000 shares just days before pitching this the stock to Warren and then telling Citibank that Warren was interested.  The transcript is at https://www.cnbc.com/id/42365586   Sokol started off ok, but the longer he talked the deeper the hole he dug. He just refused to admit that maybe he should have done things differently.  Sokol's inability to see that Munger's BYD ownership (size clearly known to all, and a personal purchase date years before BRK's buy) vs Sokol's one week ownership are apples and oranges.   Sokol was just massively tone-death.  I've heard Sokol speak at Fairfax and I find him to be a good communicator and smart guy which makes his ill-fated CNBC interview all the more perplexing.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on November 23, 2019, 03:29:07 PM
A little late to the Lubrizol subthread... What I always thought was the final straw for Sokol  was his disastrous CNBC interview after the disclosure that he bought 100,000 shares just days before pitching this the stock to Warren and then telling Citibank that Warren was interested.  The transcript is at https://www.cnbc.com/id/42365586   Sokol started off ok, but the longer he talked the deeper the hole he dug. He just refused to admit that maybe he should have done things differently.  Sokol's inability to see that Munger's BYD ownership (size clearly known to all, and a personal purchase date years before BRK's buy) vs Sokol's one week ownership are apples and oranges.   Sokol was just massively tone-death.  I've heard Sokol speak at Fairfax and I find him to be a good communicator and smart guy which makes his ill-fated CNBC interview all the more perplexing.

People can speculate all they want, but only the truth is known to a handful of people.  I think the flogging that Sokol received for a transgression that was relatively benign was overkill.  Not dissimilar to the public banishment of Alice Schroeder after the access and public support Buffett gave her.

Personally, if you don't think any purchases should overlap Berkshire's or any other employers acquisition targets...have your employees put their assets in a blind trust to avoid this conflict.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Spekulatius on November 23, 2019, 04:19:10 PM
A little late to the Lubrizol subthread... What I always thought was the final straw for Sokol  was his disastrous CNBC interview after the disclosure that he bought 100,000 shares just days before pitching this the stock to Warren and then telling Citibank that Warren was interested.  The transcript is at https://www.cnbc.com/id/42365586   Sokol started off ok, but the longer he talked the deeper the hole he dug. He just refused to admit that maybe he should have done things differently.  Sokol's inability to see that Munger's BYD ownership (size clearly known to all, and a personal purchase date years before BRK's buy) vs Sokol's one week ownership are apples and oranges.   Sokol was just massively tone-death.  I've heard Sokol speak at Fairfax and I find him to be a good communicator and smart guy which makes his ill-fated CNBC interview all the more perplexing.

People can speculate all they want, but only the truth is known to a handful of people.  I think the flogging that Sokol received for a transgression that was relatively benign was overkill.  Not dissimilar to the public banishment of Alice Schroeder after the access and public support Buffett gave her.

Personally, if you don't think any purchases should overlap Berkshire's or any other employers acquisition targets...have your employees put their assets in a blind trust to avoid this conflict.  Cheers!

Berkshire doesn’t have good internal controls in place, it’s more build on trust than on strict rules. This is pretty clear in this case  and in my opinion Sokol did a grave mistake here, imo not disclosing his conflict of interest very clearly. In my opinion, Warren should also have asked since Sokol mentioned that he owned shares in Lubrizol, but I guess at point he wasn’t interested enough to bother.

Anyways, I think the level of controls  when WEB success takes over. headquarter staff will dramatically increase when the CEO cannot draw on the same spider Webforum personal relations and trust build impoverished decades any more.

Regarding Sokol, he hopefully learned from this and I think he is an excellent operator. ingress he never could build the mini Berkshire he wanted to build, but as a CEO of Seaspan, he seems to be doing an excellent job.
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on November 24, 2019, 12:28:29 PM

People can speculate all they want, but only the truth is known to a handful of people.  I think the flogging that Sokol received for a transgression that was relatively benign was overkill.  Not dissimilar to the public banishment of Alice Schroeder after the access and public support Buffett gave her.

Personally, if you don't think any purchases should overlap Berkshire's or any other employers acquisition targets...have your employees put their assets in a blind trust to avoid this conflict.  Cheers!

I was actually going to mention the Alice thing too. There have been these people in Warren's life, that when he cuts them off for a perceived transgression - he sort of turns on them completely. Maybe this is a good quality in some sense, a version of the bath tub memory with people. He completely cuts people off and tarnishes them to others, publicly or privately, for a perceived transgression - which may be relatively minor or in Alice's case, seems to be for being unhappy with Alice for doing what he told her to do (including even the unflattering stuff). While Sokol and Alice are probably the highest profile examples of this phenomenon, there are some other examples of this phenomenon too.

Of course, Warren is my hero and I'm sort of just saying that he even Warren isn't a perfect or uncomplicated human being. It is sometimes easy to forget that because he truly does operate at an unusually high level of personal and ethical conduct. Its kind of like a hockey player just reminding oneself that even Wayne Gretzky missed shots and occasionally turned the puck over (even in the Oilers years).
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on November 27, 2019, 05:40:53 AM
Does anyone know if by naming the holdco Atlas Corporation they are paying homage to this guy?

https://macro-ops.com/the-greatest-value-investor-youve-never-heard/
Title: Re: ATCO - Atlas Corp
Post by: Cigarbutt on November 27, 2019, 07:40:52 AM
Does anyone know if by naming the holdco Atlas Corporation they are paying homage to this guy?

https://macro-ops.com/the-greatest-value-investor-youve-never-heard/
I believe you are correct. You may find a common denominator with the Horatio Alger theme (Mr. Watsa, Mr. Sokol and Mr. Odlum)
Floyd Odlum's story is fascinating. Always challenging to assess people who can combine extreme ruthlessness with extreme kindness. Mr. Odlum's specialties were opportunism and special situations. He was a low key person in a way and his record appears perfect on the surface but I've always wondered about the way he went about to buy and liquidate various investment trusts in the 30s using a technique, apparently, of paying a relative premium to insiders in order to facilitate the takeover of minority holders. I guess it was OK to do that, then.
https://horatioalger.org/members/member-detail/?id=003j000000f216rAAA
Title: Re: ATCO - Atlas Corp
Post by: petec on December 16, 2019, 05:22:17 AM
Valuation update at $14.

Seaspan is a long term hold for me (basically a bet on Sokol and capital allocation) but it will be a volatile stock and I like to think I can add value by trading around the position. I tend to use cash flow from operations as my main value metric, partly because I like simple and partly because CFOPS is what management target. CFOPS is after maintenance capex so it represents the cash available to management for debt paydown and growth, although you have to subtract pref dividends in order to arrive at CFOPs to common.

Mcap $3.9bn. Current shares out 216. Fairfax have 25m warrants at $8.05. Another 38m comes from the APR deal ($425m/$11.10). So SHO 280m.

Debt $3.9bn. Includes prefs, APR, debt for 6 of the recently acquired ships, and cash in from the conversion of FFH warrants (but not the lease liabilities). 

CFOPS available to common shareholders c.$600m:
- Just over $500m from existing assets.
- Add 7% for 7 new ships acquired (slightly less than TEU growth).
- APR does $150m in ebitda and has $425m in debt; assuming 6% interest, 25% tax, and a few million for maintenance capex, APR could add $80-90m to CFOPS.

Implies FCF/mcap = 15% and FCF/EV = 7.7%.

I regard this as a very attractive valuation if shipping rates rise; attractive if they stay flat; potentially worrying if they fall. On balance my confidence that rates will be stable to up is higher than it was due to supply discipline, but this is a levered cyclical and caution is warranted. One thing worth considering is that the duration of contracts is shortening slowly, giving increased exposure to both upside and downside.

I reduced slightly at $11.50 (d'oh) and am considering another slight reduction here, which would be made with the intention of adding if the stock falls. 
 
Title: Re: ATCO - Atlas Corp
Post by: returnonmycapital on December 16, 2019, 12:26:43 PM
With the move to a holding company and an assumed interest in "empire" building, will Seaspan reduce or even eliminate their dividend? The payout ratio does not appear conducive to building, other than through leveraged assets alone.
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on December 16, 2019, 01:20:27 PM
With the move to a holding company and an assumed interest in "empire" building, will Seaspan reduce or even eliminate their dividend? The payout ratio does not appear conducive to building, other than through leveraged assets alone.

I 100% agree why do you think they haven't eliminated the dividend yet? Shipping industry shareholder expectations?
Title: Re: ATCO - Atlas Corp
Post by: returnonmycapital on December 17, 2019, 10:39:05 AM
With the move to a holding company and an assumed interest in "empire" building, will Seaspan reduce or even eliminate their dividend? The payout ratio does not appear conducive to building, other than through leveraged assets alone.

I 100% agree why do you think they haven't eliminated the dividend yet? Shipping industry shareholder expectations?


Yes. I would think that they would want to dilute the minority shareholders (i.e. shipping shareholders wanting distributions) to as small a portion of the outstanding shares before any move to keep 100% of cashflow. With FFH, the Washingtons and Sokol, they are not far off, especially after another FFH exercise of outstanding WTS. Though I can't help thinking that an elimination will cause at least some opportunistic volatility with no-matter-what-sized shareholder rotation. 
Title: Re: ATCO - Atlas Corp
Post by: petec on December 17, 2019, 12:20:02 PM
My guess is the dividend stays. It doesn’t take up much of the FCF and that % will fall as they redeploy capital and grow FCF. I also suspect FFH wants the divi given their stated target to get to $1bn in dividend and interest income.
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on December 18, 2019, 06:46:14 AM
My guess is the dividend stays. It doesn’t take up much of the FCF and that % will fall as they redeploy capital and grow FCF. I also suspect FFH wants the divi given their stated target to get to $1bn in dividend and interest income.

I didn't know this - so Prem has said that he wants FFH to generate $1 billion annually from dividends and interest?
Title: Re: ATCO - Atlas Corp
Post by: petec on December 18, 2019, 08:33:22 AM
My guess is the dividend stays. It doesn’t take up much of the FCF and that % will fall as they redeploy capital and grow FCF. I also suspect FFH wants the divi given their stated target to get to $1bn in dividend and interest income.

I didn't know this - so Prem has said that he wants FFH to generate $1 billion annually from dividends and interest?

Can’t remember if it was Prem or Rivett but I’ve heard it more than once and it’s an explicit target. I suspect it was part of the motivation for selling APR, which did not pay a dividend but now, in effect, does.
Title: Re: ATCO - Atlas Corp
Post by: Saluki on January 16, 2020, 07:45:30 AM
Seaspan and Swiber terminate their $200 million deal.

https://biv.com/article/2020/01/seaspan-corps-us200-million-swiber-plan-sidelined

I'm still very long SSW.  I hope SSW got a breakup fee. 
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on January 16, 2020, 10:43:00 AM
A shame it didn't work out. Sokol sounded frustrated when talking about Swiber at the investor day so its not a huge surprise.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on February 19, 2020, 07:08:49 AM
I couldn't listen in on the CC...  did they provide any update on impact of the virus on earnings?
Title: Re: ATCO - Atlas Corp
Post by: petec on February 19, 2020, 09:57:38 AM
I couldn't listen in on the CC...  did they provide any update on impact of the virus on earnings?

They got a few questions on it. There's some disruption, more from government actions to prevent spread than the disease itself. But doesn't sound like a big impact on operations and earnings are largely insulated as they don't have much on spot at the moment.

Meanwhile the cash rolls in.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on March 18, 2020, 08:42:13 PM
hmmm will dividend get cut ?
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on March 19, 2020, 06:17:58 AM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.
Title: Re: ATCO - Atlas Corp
Post by: petec on March 19, 2020, 11:35:03 AM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

I keep meaning to recheck the debt maturity schedule but off the top of my head between cash, unencumbered ships, the remaining space on their new flexible $2bn secured debt facility, and cash flowing in I’m pretty sure they will be fine. In fact I am hoping they get to buy some distressed assets.
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on March 19, 2020, 01:04:29 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."
Title: Re: ATCO - Atlas Corp
Post by: petec on March 19, 2020, 01:26:25 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on March 19, 2020, 01:47:57 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.
Title: Re: ATCO - Atlas Corp
Post by: petec on March 19, 2020, 02:08:28 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.

Yep

Probably fairly tight on liquidity. But pre-Covid they had $600m a year of OCF coming in and a decent chunk of that is contracted, so they’ll dig themselves out of a hole.
Title: Re: ATCO - Atlas Corp
Post by: StubbleJumper on March 19, 2020, 02:12:50 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.

Yep

Probably fairly tight on liquidity. But pre-Covid they had $600m a year of OCF coming in and a decent chunk of that is contracted, so they’ll dig themselves out of a hole.


This is a bit of a bad time for FFH to be short of liquidity too.


SJ
Title: Re: ATCO - Atlas Corp
Post by: petec on March 19, 2020, 02:26:44 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.

Yep

Probably fairly tight on liquidity. But pre-Covid they had $600m a year of OCF coming in and a decent chunk of that is contracted, so they’ll dig themselves out of a hole.


This is a bit of a bad time for FFH to be short of liquidity too.


SJ

Yep. But then, it’s a bit of a bad time ;)
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on March 19, 2020, 06:10:12 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.

Yep

Probably fairly tight on liquidity. But pre-Covid they had $600m a year of OCF coming in and a decent chunk of that is contracted, so they’ll dig themselves out of a hole.


This is a bit of a bad time for FFH to be short of liquidity too.


SJ

Just curious, why? Does Fairfax have specific liabilities coming due, or especially large insurance losses coming?
Title: Re: ATCO - Atlas Corp
Post by: StubbleJumper on March 19, 2020, 06:28:51 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.

Yep

Probably fairly tight on liquidity. But pre-Covid they had $600m a year of OCF coming in and a decent chunk of that is contracted, so they’ll dig themselves out of a hole.


This is a bit of a bad time for FFH to be short of liquidity too.


SJ

Just curious, why? Does Fairfax have specific liabilities coming due, or especially large insurance losses coming?


It has $1.1B at the holdco level, about $600m coming from an asset sale, a $2b revolver of which $300m is drawn, and its insurance subs are mostly capital constrained.  I estimate that FFH holdco needs another $400-500m during 2020 for its interest costs, admin costs and planned capex.  Prem Watsa has always proclaimed that he never wants to drop below $1B cash at the holdco.  Short of drawing heavily on that revolver, floating new debt or issuing new equity, they don't have loads of free cash to inject into SSW. 

Moving forward into 2021, the holdco has a ~$300m bullet maturity, perhaps $250m of interest costs, maybe $50m admin and possibly $300m of dividends to fund.  If capital markets don't loosen up, they will really need the space in that revolver.

Bad timing to be liquidity constrained.


SJ
Title: Re: ATCO - Atlas Corp
Post by: petec on March 30, 2020, 02:18:22 PM
Does anyone think this has a chance of bankruptcy/severe cash crunch issue? I believe the restructuring they had undertaken provides them breathing room - even if the pandemic's economic consequences grow worse than currently anticipated - but perhaps I'm missing something.

"As of December 31, 2019, Seaspan had total liquidity of $470.0 million, consisting of $195.0
million of cash and cash equivalents and $275.0 million of undrawn commitments under the
Program. Additionally, as of December 31, 2019, Seaspan’s unencumbered asset pool included
32 vessels."

I think that some of the $275m space in the programme has since been used. And what liquidity doesn’t tell you is what debt is coming due.
You're right they bought 4 containerships for $367 million in late February and checking their Q4 report they have about $660 million in debt and lease liabilities this year.

Yep

Probably fairly tight on liquidity. But pre-Covid they had $600m a year of OCF coming in and a decent chunk of that is contracted, so they’ll dig themselves out of a hole.

This was wrong. They’ve just financed $340m of this deal with a 10y finance lease with flexible collateral. So it doesn’t draw down liquidity. Will be interesting to get the details (hopefully) on the next call.
Title: Re: ATCO - Atlas Corp
Post by: petec on March 30, 2020, 02:32:39 PM
Pretty amazing to think they’ve bought 11 vessels since September, expanding the fleet by 10%.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on March 30, 2020, 03:47:04 PM
Merged Seaspan thread.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on May 05, 2020, 06:03:59 AM
Q1 is out. Looks fine, but call commentary will be key.

If annualising March is a reasonable thing to do they paid 7.5x ebitda for APR - or less if they can get utilisation up from 63%.

https://ir.atlascorporation.com/earning-reports?cat=34

Edit: I had not seen the guidance. Looks like they paid 5.2-5.5x ebitda for APR.

I think annualised operating cash flow after interest and pref dividends is running at around $550-600m, or a >30% yield on the market cap.
Title: Re: ATCO - Atlas Corp
Post by: gfp on May 05, 2020, 06:42:43 AM
Was this expected?
"In April 2020, Charles Ferry resigned as Chief Executive Officer of APR."
Title: Re: ATCO - Atlas Corp
Post by: petec on May 05, 2020, 06:44:53 AM
Was this expected?
"In April 2020, Charles Ferry resigned as Chief Executive Officer of APR."

I don't know whether it was expected, but it was known.

Frankly it's not *un*expected. Change of ownership often brings a change of people.
Title: Re: ATCO - Atlas Corp
Post by: brycepeterson on May 05, 2020, 10:15:44 AM
I own the preferred shares, series H and I.  Read today's report and presentation.  It's comforting to get confirmation the operating cash flow was as expected in 1Q20 and sounds stable in 2020.  For those not watching Atlas' preferred shares, it was a crazy ride during the height of the panic.  They fell from about $25 to high single digits.  At $25 pay about 8%; $10 about 20%.  Despite researching the company well prior to the preferred purchases, when prices drop like that it does mess with your mind, "does someone know something I don't," etc.  Preferred shares of series H and I back to about $20 1/2, pay about 10%.  Not a bad buy here.
Title: Re: ATCO - Atlas Corp
Post by: petec on May 05, 2020, 11:03:02 AM
I own the preferred shares, series H and I.  Read today's report and presentation.  It's comforting to get confirmation the operating cash flow was as expected in 1Q20 and sounds stable in 2020.  For those not watching Atlas' preferred shares, it was a crazy ride during the height of the panic.  They fell from about $25 to high single digits.  At $25 pay about 8%; $10 about 20%.  Despite researching the company well prior to the preferred purchases, when prices drop like that it does mess with your mind, "does someone know something I don't," etc.  Preferred shares of series H and I back to about $20 1/2, pay about 10%.  Not a bad buy here.

Wow! Wish I’d noticed them in the single digits.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on May 05, 2020, 11:09:12 AM
wow. 20%  sounds like set for retirement. 
i missed the boat

what’s the symbol in case the boat comes back for me... thanks !
Title: Re: ATCO - Atlas Corp
Post by: brycepeterson on May 05, 2020, 11:55:47 AM
Preferred shares have different symbols depending on where you're trading.  Common symbols for these are ATCO-H and ATCO-I, or ATCO.PH and ATCO.PI.  You'll find them wherever you're trading, might just have to do a symbol lookup. 

It was pretty scary.  Like petec states, Atlas' operating cash flow is contracted and highly expected to by $500-$600 million in 2020, which means the preferred share dividends are easily payable ($67-$70 million per year total preferred payout).  Also, expectation is they're done buying new ships, thus extremely low capex 2Q20-4Q20 and beyond (reinforces big free cash flow).  But when the shares plummeted, I was wondering if counter parties were going bankrupt, or if global trade was slowing so much that Atlas would have to make exceptions to keep clients solvent, etc.  A lot of bad stuff goes through your mind when you see something you thought was a secure payment at $25 go to single digits.  Recovered to $15, but would still have huge -10% to +10% days with no news.  Just hitting $20 now...
Title: Re: ATCO - Atlas Corp
Post by: petec on May 05, 2020, 12:47:22 PM
Next time they're at 15 or 10, would you mind letting me know?
Title: Re: ATCO - Atlas Corp
Post by: brycepeterson on May 05, 2020, 02:29:44 PM
:) ha, I hope to notice, too!  The drop below $10 was BRIEF.  I think like a day or two?  Off memory :) 

$15's price area was a little more pronounced - during those really dramatic days in mid to late March.  I just looked at the chart of the H's, and I didn't realize it hit $20 about two weeks ago.  Still not a bad buy here at $20?  Around a 10% annual income.

I just read the 1Q20 call transcript.  CEO states Seaspan is in constant communication with major customers and doesn't expect any revisions to deals.  They think shipping volumes already put in the bottom...expect volumes to gradually increase from here.   Said their customers today are dramatically different than in 2008-09 (in better fiscal shape).  Pretty good transcript considering how things feel/felt at the lows.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 09, 2020, 08:03:54 AM
Is 23% of Seaspan’s revenue at risk?

Seaspan’s 2nd largest client, Yang Ming, accounts for 23% of revenue and looks to me like it could declare bankruptcy any time now. (Look at 2018 losses and 2019 losses relative to debt and remaining equity. I’m assuming 2020 won’t be a banner year.)

Yang Ming partly blames high cost charters for its underperformance, and seems to have made reducing charters a key element of its turnaround strategy.

Page 16 of Atco’s annual report states: Under some circumstances, we could lose a time charter if a customer declares bankruptcy.

Atco management had a canned answer to questions about client risk in the recent conference call (Which is why I decided to do some digging).

Does anyone have insight into Yang Ming-related risk/mitigation?

(Disclosure: I own some Fairfax, but not Atco.)

Title: Re: ATCO - Atlas Corp
Post by: petec on May 09, 2020, 10:10:49 AM
I can’t see the 2019 financials - could you post a link? Also to your source for the comments about lease cost and strategy please.

My assumption is that deferrals (by lenders and lessors) are more likely than bankruptcy, but I could be WAY wrong.

I would also assume ATCO would be moderately happy to give lower rates, or leases indexed to spot rates, in return for longer leases.

Interesting that Brookfield say container traffic through their ports is now picking up after troughing in q1 when China shut down.
Title: Re: ATCO - Atlas Corp
Post by: petec on May 09, 2020, 10:47:08 AM
Also I see Yang Ming just raised preferred capital in a private placement.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 09, 2020, 11:49:05 AM
Yang Ming 2019 Earnings:

https://www.yangming.com/News/press_release/PressContent.aspx?BulletinType=PressRelease&uid=11870&localSiteD=
Title: Re: ATCO - Atlas Corp
Post by: arcube on May 15, 2020, 09:11:51 AM
Am I reading this right?

Fairfax Financial Holdings has a position in this equal to roughly 54% of portfolio?
Title: Re: ATCO - Atlas Corp
Post by: Parsad on May 15, 2020, 09:45:58 AM
Am I reading this right?

Fairfax Financial Holdings has a position in this equal to roughly 54% of portfolio?

The data is skewed. 

- Fairfax's portfolio is like $30B, so $800M would be about 2.8%. 
- Of the non-cash/non-bond assets tied up in equities/businesses, it probably makes up like 18% or so...I'm just eyeballing without looking at the financials. 
- Of just trading equities they've invested in (XOM, GOOG, BB, ATCO, etc)...$3-4B...probably like 25-30%. 

Cheers!
Title: Re: ATCO - Atlas Corp
Post by: arcube on May 15, 2020, 10:00:33 AM
Am I reading this right?

Fairfax Financial Holdings has a position in this equal to roughly 54% of portfolio?

The data is skewed. 

- Fairfax's portfolio is like $30B, so $800M would be about 2.8%. 
- Of the non-cash/non-bond assets tied up in equities/businesses, it probably makes up like 18% or so...I'm just eyeballing without looking at the financials. 
- Of just trading equities they've invested in (XOM, GOOG, BB, ATCO, etc)...$3-4B...probably like 25-30%. 

Cheers!

Thank you for the clarification Sanjeev.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 22, 2020, 12:03:56 PM
Has anyone worked out whether the lifetime value of a ship is actually positive?

It was a concern on this thread a couple years ago that there was a negative lifetime value. (At which point the posters who originally carried this thread threw in the towel on Seaspan. Then David Sokol came along and a different group of posters picked up the conversation.)

The concern was a ship looks like a great investment during the long term charter phase, but after that the economics deteriorate fast, culminating in a big loss ultimately taken when the ship has to be scrapped - resulting in a negative lifetime value.

The thesis was the only way to overcome negative lifetime value near term is to run a quasi-ponzi scheme. You have to buy lots of new ships on long term charter to make near term gains look strong. The problem is once the market eventually saturates and you have more ships going off charter than you have new boats to offset losses then the business collapses.

I’m particularly curious about the amount of free cash generated during the long term charter relative to the original cost of the ship. That would give an idea of the odds of breaking even over the ship’s remaining life.

I would normally throw this in the too hard pile. But, I mostly hope someone at Fairfax has done this kind of per-ship analysis. I think there’s a lot of trust at Fairfax that Sokol will work his magic in an entirely different industry than he did at Mid American. (Yet, Sokol has invested in companies in the past that he publicly recognized after the fact didn’t earn the cost of capital - see Middleburg Bank. I’m concerned this is another such case.)

Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 22, 2020, 02:20:31 PM
Here’s a Very Rough example of the negative lifetime value (if you go back to the pre-Sokol years in this thread you can see where the concerns were raised after boats started getting scrapped for much lower than their carrying value):

Acquire boat for $100 million

First 10 years:

- Long term charter nets $3 million annually for a total of $30 million.

Next 10 years:

- Boat basically breaks even on short term rates netting a total of $1 million over 10 years.
- Boat is valued at $35 million on the books.

End of year 20:

- Boat is sold for scrap for $1 million.
- $34 million of boat value is written off.

Lifetime value of the boat is negative. But, earnings and free cash looked decent during the first 10 years.
Title: Re: ATCO - Atlas Corp
Post by: brycepeterson on May 22, 2020, 03:19:59 PM
Thanks for the thoughts Thrifty - I've been wondering same thing.  I own the Series H and I preferred shares.  Have not touched the common shares.  My sense is bad business to own, but good enough to lend to (bonds or preferred shares).
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 30, 2020, 12:17:57 PM
For less than the price of a new ship Atco could buy out their second largest publicly traded competitor, Danaos, which would increase TEU by over 30%. Danaos’s market cap has dropped to less than $100 million.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 30, 2020, 12:52:53 PM
But, Danaos is a 40 year old company. So they are having to take big, consistent, impairments year after year now. Like last year’s $200 million write down on some 15 year old Panamax ships. And $400 million of write downs a couple years before that. In total Danaos has accumulated $200 million of losses over the last 5 years. My concern is Danaos provides a preview of Seaspan’s fate. Just look at how Danaos’s market value has plummeted over time as the impairments overwhelmed earnings.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on May 30, 2020, 04:21:29 PM
But, Danaos is a 40 year old company. So they are having to take big, consistent, impairments year after year now. Like last year’s $200 million write down on some 15 year old Panamax ships. And $400 million of write downs a couple years before that. In total Danaos has accumulated $200 million of losses over the last 5 years. My concern is Danaos provides a preview of Seaspan’s fate. Just look at how Danaos’s market value has plummeted over time as the impairments overwhelmed earnings.

Sokol may be the preeminent operator in large capex type businesses...Kiewit Energy, Cal-Energy, Mid-American, Netjets, BYD Company, Atlas Corp.  If anyone understands large capital requiring, depreciating asset businesses, it's David Sokol.  Not only is he a spectacular manager, but he's as good an investor.  I would not be out of place to say that he is one of the few people as talented, if not more talented, than Warren Buffett or Prem Watsa.  If he had not left Berkshire as he did, David Sokol's name would be in the same stratosphere as Jack Welch, Jamie Dimon, Jeff Bezos, etc.  He is an extraordinary operator...so I doubt you will see anything happen even remotely close to Danaos.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Parsad on May 30, 2020, 04:32:14 PM
Here’s a Very Rough example of the negative lifetime value (if you go back to the pre-Sokol years in this thread you can see where the concerns were raised after boats started getting scrapped for much lower than their carrying value):

Acquire boat for $100 million

First 10 years:

- Long term charter nets $3 million annually for a total of $30 million.

Next 10 years:

- Boat basically breaks even on short term rates netting a total of $1 million over 10 years.
- Boat is valued at $35 million on the books.

End of year 20:

- Boat is sold for scrap for $1 million.
- $34 million of boat value is written off.

Lifetime value of the boat is negative. But, earnings and free cash looked decent during the first 10 years.

You have to include the debt that is written off on the liability side as well.  You don't suddenly lose $34M of value. 

Free cash would actually have increased dramatically as capex for that boat is now very low, but it is still operational and generating the same revenue.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 30, 2020, 04:46:07 PM
But, Danaos is a 40 year old company. So they are having to take big, consistent, impairments year after year now. Like last year’s $200 million write down on some 15 year old Panamax ships. And $400 million of write downs a couple years before that. In total Danaos has accumulated $200 million of losses over the last 5 years. My concern is Danaos provides a preview of Seaspan’s fate. Just look at how Danaos’s market value has plummeted over time as the impairments overwhelmed earnings.

Sokol may be the preeminent operator in large capex type businesses...Kiewit Energy, Cal-Energy, Mid-American, Netjets, BYD Company, Atlas Corp.  If anyone understands large capital requiring, depreciating asset businesses, it's David Sokol.  Not only is he a spectacular manager, but he's as good an investor.  I would not be out of place to say that he is one of the few people as talented, if not more talented, than Warren Buffett or Prem Watsa.  If he had not left Berkshire as he did, David Sokol's name would be in the same stratosphere as Jack Welch, Jamie Dimon, Jeff Bezos, etc.  He is an extraordinary operator...so I doubt you will see anything happen even remotely close to Danaos.  Cheers!

I Totally agree with you on Sokol. He’s an operations management machine. It kills me Sokol isn’t overseeing Berkshire’s operations. I think his management approach and intensity would unlock So Much more value. And, his track record is the reason why I think Fairfax pretty much had no choice but to invest alongside him. I’m all for investing in David Sokol. Who better to competently manage billions of dollars.

I don’t so much mind the bond deal, and I’m glad Atco is diversifying, because I want to see Sokol work his magic. I just can’t find evidence that container ships have a positive lifetime value.

Container ships are a bit like owning a rental house that nets $10k a year for 3 years, so you feel pretty good about life, but in years 4 through 6 you have to replace the HVAC system, the water line, and the roof, so from a cash flow standpoint you feel like you’re treading water, and then in year 7 you bulldoze the house and sell the scraps.

I just hope that if Seaspan’s is indeed a low-return business model, that Sokol is able to maintain his managerial reputation by pivoting before it’s too late. If anyone can do it he can.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on May 30, 2020, 05:13:55 PM
But, Danaos is a 40 year old company. So they are having to take big, consistent, impairments year after year now. Like last year’s $200 million write down on some 15 year old Panamax ships. And $400 million of write downs a couple years before that. In total Danaos has accumulated $200 million of losses over the last 5 years. My concern is Danaos provides a preview of Seaspan’s fate. Just look at how Danaos’s market value has plummeted over time as the impairments overwhelmed earnings.

Sokol may be the preeminent operator in large capex type businesses...Kiewit Energy, Cal-Energy, Mid-American, Netjets, BYD Company, Atlas Corp.  If anyone understands large capital requiring, depreciating asset businesses, it's David Sokol.  Not only is he a spectacular manager, but he's as good an investor.  I would not be out of place to say that he is one of the few people as talented, if not more talented, than Warren Buffett or Prem Watsa.  If he had not left Berkshire as he did, David Sokol's name would be in the same stratosphere as Jack Welch, Jamie Dimon, Jeff Bezos, etc.  He is an extraordinary operator...so I doubt you will see anything happen even remotely close to Danaos.  Cheers!

I Totally agree with you on Sokol. He’s an operations management machine. It kills me Sokol isn’t overseeing Berkshire’s operations. I think his management approach and intensity would unlock So Much more value. And, his track record is the reason why I think Fairfax pretty much had no choice but to invest alongside him. I’m all for investing in David Sokol. Who better to competently manage billions of dollars.

I don’t so much mind the bond deal, and I’m glad Atco is diversifying, because I want to see Sokol work his magic. I just can’t find evidence that container ships have a positive lifetime value.

Container ships are a bit like owning a rental house that nets $10k a year for 3 years, so you feel pretty good about life, but in years 4 through 6 you have to replace the HVAC system, the water line, and the roof, so from a cash flow standpoint you feel like you’re treading water, and then in year 7 you bulldoze the house and sell the scraps.

I just hope that if Seaspan’s is indeed a low-return business model, that Sokol is able to maintain his managerial reputation by pivoting before it’s too late. If anyone can do it he can.

No they don't, but most large capex businesses have depreciating assets...doesn't mean they aren't good businesses.  In fact, Berkshire has become one of the leaders in investing in such businesses, because they consume so much free cash and tend to have valuable operating moats.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 30, 2020, 05:30:20 PM
But, Danaos is a 40 year old company. So they are having to take big, consistent, impairments year after year now. Like last year’s $200 million write down on some 15 year old Panamax ships. And $400 million of write downs a couple years before that. In total Danaos has accumulated $200 million of losses over the last 5 years. My concern is Danaos provides a preview of Seaspan’s fate. Just look at how Danaos’s market value has plummeted over time as the impairments overwhelmed earnings.

Sokol may be the preeminent operator in large capex type businesses...Kiewit Energy, Cal-Energy, Mid-American, Netjets, BYD Company, Atlas Corp.  If anyone understands large capital requiring, depreciating asset businesses, it's David Sokol.  Not only is he a spectacular manager, but he's as good an investor.  I would not be out of place to say that he is one of the few people as talented, if not more talented, than Warren Buffett or Prem Watsa.  If he had not left Berkshire as he did, David Sokol's name would be in the same stratosphere as Jack Welch, Jamie Dimon, Jeff Bezos, etc.  He is an extraordinary operator...so I doubt you will see anything happen even remotely close to Danaos.  Cheers!

I Totally agree with you on Sokol. He’s an operations management machine. It kills me Sokol isn’t overseeing Berkshire’s operations. I think his management approach and intensity would unlock So Much more value. And, his track record is the reason why I think Fairfax pretty much had no choice but to invest alongside him. I’m all for investing in David Sokol. Who better to competently manage billions of dollars.

I don’t so much mind the bond deal, and I’m glad Atco is diversifying, because I want to see Sokol work his magic. I just can’t find evidence that container ships have a positive lifetime value.

Container ships are a bit like owning a rental house that nets $10k a year for 3 years, so you feel pretty good about life, but in years 4 through 6 you have to replace the HVAC system, the water line, and the roof, so from a cash flow standpoint you feel like you’re treading water, and then in year 7 you bulldoze the house and sell the scraps.

I just hope that if Seaspan’s is indeed a low-return business model, that Sokol is able to maintain his managerial reputation by pivoting before it’s too late. If anyone can do it he can.

No they don't, but most large capex businesses have depreciating assets...doesn't mean they aren't good businesses.  In fact, Berkshire has become one of the leaders in investing in such businesses, because they consume so much free cash and tend to have valuable operating moats.  Cheers!

I say we give it a positive spin and just look at the high levels of free cash from leased boats as “float” that David Sokol gets to invest. If the boat sucks wind after it goes off lease, big deal, Sokol will have already made up for it and then some.
Title: Re: ATCO - Atlas Corp
Post by: mcliu on May 30, 2020, 09:44:06 PM
But, Danaos is a 40 year old company. So they are having to take big, consistent, impairments year after year now. Like last year’s $200 million write down on some 15 year old Panamax ships. And $400 million of write downs a couple years before that. In total Danaos has accumulated $200 million of losses over the last 5 years. My concern is Danaos provides a preview of Seaspan’s fate. Just look at how Danaos’s market value has plummeted over time as the impairments overwhelmed earnings.

Sokol may be the preeminent operator in large capex type businesses...Kiewit Energy, Cal-Energy, Mid-American, Netjets, BYD Company, Atlas Corp.  If anyone understands large capital requiring, depreciating asset businesses, it's David Sokol.  Not only is he a spectacular manager, but he's as good an investor.  I would not be out of place to say that he is one of the few people as talented, if not more talented, than Warren Buffett or Prem Watsa.  If he had not left Berkshire as he did, David Sokol's name would be in the same stratosphere as Jack Welch, Jamie Dimon, Jeff Bezos, etc.  He is an extraordinary operator...so I doubt you will see anything happen even remotely close to Danaos.  Cheers!

I Totally agree with you on Sokol. He’s an operations management machine. It kills me Sokol isn’t overseeing Berkshire’s operations. I think his management approach and intensity would unlock So Much more value. And, his track record is the reason why I think Fairfax pretty much had no choice but to invest alongside him. I’m all for investing in David Sokol. Who better to competently manage billions of dollars.

I don’t so much mind the bond deal, and I’m glad Atco is diversifying, because I want to see Sokol work his magic. I just can’t find evidence that container ships have a positive lifetime value.

Container ships are a bit like owning a rental house that nets $10k a year for 3 years, so you feel pretty good about life, but in years 4 through 6 you have to replace the HVAC system, the water line, and the roof, so from a cash flow standpoint you feel like you’re treading water, and then in year 7 you bulldoze the house and sell the scraps.

I just hope that if Seaspan’s is indeed a low-return business model, that Sokol is able to maintain his managerial reputation by pivoting before it’s too late. If anyone can do it he can.

No they don't, but most large capex businesses have depreciating assets...doesn't mean they aren't good businesses.  In fact, Berkshire has become one of the leaders in investing in such businesses, because they consume so much free cash and tend to have valuable operating moats.  Cheers!

Sorry, I don’t follow. Isn’t Thrifty3000 basically saying new ships don’t generate enough cash over its lifetime to justify the upfront cost? So if you’re buying a boat for more than the NPV of cash flows, how can it create value?

Also, where does the moat come from? Long-run capacity in the shipping business seems unlimited? Maybe short-term there’s some constraint due to by shipyard capacity?
Title: Re: ATCO - Atlas Corp
Post by: petec on May 31, 2020, 06:21:57 AM
I think to make this discussion you have to specify a few more parameters. Are you buying the ships new or old? Are you buying at the top of the cycle when prices are high or at the bottom when they’re low? And do you think returns actually might be better in the slow growth/mature phase of the industry’s lifecycle than they were in the go-go years when technology (or rather size) was evolving at pace (driving obsolescence risk) and speculative capital was everywhere?

I believe cyclical industries are dream playgrounds for outstanding capital allocators. Seaspan+Sokol=opportunity in my view.

Might be wrong!
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on May 31, 2020, 01:36:17 PM
Alright, I’ve torn the Atco annual report apart trying to pin down the value of a boat to owners. There’s no way to do it with precision, but I think I got the gist.

It looks to me like the break even point IS likely achieved during the long-term charter. Phew. And, it looks like whatever free cash is earned from the boat post long-term charter is gravy.

To draw this conclusion I looked at their recent purchase price of several 12,000 TEU boats, and then derived all kinds of rough assumptions about charter rates and per-boat expenses from throughout the annual report.

The example I used...

A 12,000 TEU ship purchased for approximately $100 million.

I assumed a 10 year charter worth $180 million (~$50k daily rate).

10 years of interest expense, overhead, boat operations, and boat maintenance appear to me to cost something moderately less than $80 million. Let’s call it $70 million.

So, from that example it seems reasonable to assume the long term charter earns enough to cover the purchase price of the boat, all expenses, and probably a small profit.

The precise return on equity is impossible to pinpoint, since it depends on how much equity is used to purchase the boat, and on how much cash is generated after the long-term charter.

I’m going to go out on a limb and say that pre-Sokol the IRR per boat was maybe in the neighborhood of 7% (with much of the return paid out as dividends). My gut tells me Sokol is pushing for at least 15% IRR. And, recent trends in utilization and cost containment (and probably boat purchasing and contract pricing discipline) were heading in the right direction.

I’m definitely more comfortable with the business model at this point - especially under an operator like Sokol.

At this point my main concerns are things like:

- industry headwinds
- customer concentration/risk (Yang Ming)
- implications of the very generous carrying value of the boats.

Will have to keep noodling on this one.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on May 31, 2020, 04:54:10 PM
Alright, I’ve torn the Atco annual report apart trying to pin down the value of a boat to owners. There’s no way to do it with precision, but I think I got the gist.

It looks to me like the break even point IS likely achieved during the long-term charter. Phew. And, it looks like whatever free cash is earned from the boat post long-term charter is gravy.

To draw this conclusion I looked at their recent purchase price of several 12,000 TEU boats, and then derived all kinds of rough assumptions about charter rates and per-boat expenses from throughout the annual report.

The example I used...

A 12,000 TEU ship purchased for approximately $100 million.

I assumed a 10 year charter worth $180 million (~$50k daily rate).

10 years of interest expense, overhead, boat operations, and boat maintenance appear to me to cost something moderately less than $80 million. Let’s call it $70 million.

So, from that example it seems reasonable to assume the long term charter earns enough to cover the purchase price of the boat, all expenses, and probably a small profit.

The precise return on equity is impossible to pinpoint, since it depends on how much equity is used to purchase the boat, and on how much cash is generated after the long-term charter.

I’m going to go out on a limb and say that pre-Sokol the IRR per boat was maybe in the neighborhood of 7% (with much of the return paid out as dividends). My gut tells me Sokol is pushing for at least 15% IRR. And, recent trends in utilization and cost containment (and probably boat purchasing and contract pricing discipline) were heading in the right direction.

I’m definitely more comfortable with the business model at this point - especially under an operator like Sokol.

At this point my main concerns are things like:

- industry headwinds
- customer concentration/risk (Yang Ming)
- implications of the very generous carrying value of the boats.

Will have to keep noodling on this one.

Now you got it!  The 15% IRR is achieved by high utilization rates of 96-97% and reduced financing costs through ATCO's model. 

The shipping industry is very similar to Sokol's experience with Netjets...how do you share the cost of transport and increase bookings to very high efficiencies.  If you manage to distribute your financing cost and are efficient on bookings, you get a high capex business that is modestly profitable. 

It creates an internal moat that makes it difficult for competitors to enter the market because they either get the capital costs wrong or can't become efficient enough on the booking side.  A great operator like Sokol is priceless for such businesses and such businesses don't work unless you have a great operator!  Look at Railroads, look at the Airline industry...very much like Shipping...Energy is somewhat similar.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on June 01, 2020, 12:00:54 AM
Thrifty I think your framework is about right. But the key point is that if the economics of buying ships don't look good Sokol won't buy ships. So while this concern is key for the industry, it's a slightly moot point for Atlas.
Title: Re: ATCO - Atlas Corp
Post by: skanjete on June 01, 2020, 01:01:21 AM
Alright, I’ve torn the Atco annual report apart trying to pin down the value of a boat to owners. There’s no way to do it with precision, but I think I got the gist.

It looks to me like the break even point IS likely achieved during the long-term charter. Phew. And, it looks like whatever free cash is earned from the boat post long-term charter is gravy.

To draw this conclusion I looked at their recent purchase price of several 12,000 TEU boats, and then derived all kinds of rough assumptions about charter rates and per-boat expenses from throughout the annual report.

The example I used...

A 12,000 TEU ship purchased for approximately $100 million.

I assumed a 10 year charter worth $180 million (~$50k daily rate).

10 years of interest expense, overhead, boat operations, and boat maintenance appear to me to cost something moderately less than $80 million. Let’s call it $70 million.

So, from that example it seems reasonable to assume the long term charter earns enough to cover the purchase price of the boat, all expenses, and probably a small profit.

The precise return on equity is impossible to pinpoint, since it depends on how much equity is used to purchase the boat, and on how much cash is generated after the long-term charter.

I’m going to go out on a limb and say that pre-Sokol the IRR per boat was maybe in the neighborhood of 7% (with much of the return paid out as dividends). My gut tells me Sokol is pushing for at least 15% IRR. And, recent trends in utilization and cost containment (and probably boat purchasing and contract pricing discipline) were heading in the right direction.

I’m definitely more comfortable with the business model at this point - especially under an operator like Sokol.

At this point my main concerns are things like:

- industry headwinds
- customer concentration/risk (Yang Ming)
- implications of the very generous carrying value of the boats.

Will have to keep noodling on this one.

Now you got it!  The 15% IRR is achieved by high utilization rates of 96-97% and reduced financing costs through ATCO's model. 

The shipping industry is very similar to Sokol's experience with Netjets...how do you share the cost of transport and increase bookings to very high efficiencies.  If you manage to distribute your financing cost and are efficient on bookings, you get a high capex business that is modestly profitable. 

It creates an internal moat that makes it difficult for competitors to enter the market because they either get the capital costs wrong or can't become efficient enough on the booking side.  A great operator like Sokol is priceless for such businesses and such businesses don't work unless you have a great operator!  Look at Railroads, look at the Airline industry...very much like Shipping...Energy is somewhat similar.  Cheers!

I don't think you can compare shipping and airlines to railroads, real estate and energy. Each sector is capital intensive, but it is far more easier to create a moat in the last 3 sectors than in shipping and airlines.
In railroads, real estate and energy, there basically is a moat because of the location. The infrastructure simply cannot be replicated because of the location limitations or regulation that prohibits it.

With shipping and airlines, there is no such limitation and supply can increase as long as somebody has the money available to fund it. The sector is capital intensive, cyclical and commodotised : a really bad combination.

The only way to create a moat is by  superior operating margins and thus structurally lower operating costs. Since these costs are a smaller percentage of revenue, it's difficult to create or maintain the moat, and even then, results can only be seen on the long term by higher survivability, not necessarily higher profit.
Because of the high capital intesitivity, an operator can easily fool himself by just looking at EBITDA or cash flow and negating the high depreciation. In that way, zombies can go on for a long time, creating bad industry conditions for all participants for a very long time.

It's no coincidence I think that the shipping companies pay such high dividends. The owners want to extract as much money from cash flow as they can, while they can. The shipping families also create their wealth by playing the other financing parties. The markets don't seem to understand the sector's dynamic and appear willing to buy overvalued shares when things go great. On the other hand, banks don't seem to understand it eather and get fooled into financing extra capacity. When things go bad, their collateral disappears and they have no choice but to extend and pretend. This way, the shipping families profit when things are great and pass the buck when thing are less rosy. This way the "shipping dynasties" create their wealth in an otherwise risky and difficult business.

I conceed that Seaspan operates in a somewhat different way, with longtime charters and different financing models. That's why it is my favorite amongst shippers. But still, I think the sector is lousy and not to be compared to other capital intensive businesses as energy or
railways.

For people interested in the sector : a fun book to read is "the shipping man" from Matthew McCleery. Some fictional figures in the book seem to be based on real people in the sector by the way.
Title: Re: ATCO - Atlas Corp
Post by: petec on June 01, 2020, 01:38:11 AM
Skanjete, while I broadly agree, I'd point out that Seaspan is a lessor not an operator. Leasing is a highly fragmented industry, and there may be an opportunity for the scale operator to carve out a moat by lowering its cost of capital and by being the best partner to the operators. That moat may not be deep or wide, but combined with real capital discipline it may be enough to drive a significant difference in ROIC between the leader and the rest.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on June 01, 2020, 10:42:04 AM
Alright, I’ve torn the Atco annual report apart trying to pin down the value of a boat to owners. There’s no way to do it with precision, but I think I got the gist.

It looks to me like the break even point IS likely achieved during the long-term charter. Phew. And, it looks like whatever free cash is earned from the boat post long-term charter is gravy.

To draw this conclusion I looked at their recent purchase price of several 12,000 TEU boats, and then derived all kinds of rough assumptions about charter rates and per-boat expenses from throughout the annual report.

The example I used...

A 12,000 TEU ship purchased for approximately $100 million.

I assumed a 10 year charter worth $180 million (~$50k daily rate).

10 years of interest expense, overhead, boat operations, and boat maintenance appear to me to cost something moderately less than $80 million. Let’s call it $70 million.

So, from that example it seems reasonable to assume the long term charter earns enough to cover the purchase price of the boat, all expenses, and probably a small profit.

The precise return on equity is impossible to pinpoint, since it depends on how much equity is used to purchase the boat, and on how much cash is generated after the long-term charter.

I’m going to go out on a limb and say that pre-Sokol the IRR per boat was maybe in the neighborhood of 7% (with much of the return paid out as dividends). My gut tells me Sokol is pushing for at least 15% IRR. And, recent trends in utilization and cost containment (and probably boat purchasing and contract pricing discipline) were heading in the right direction.

I’m definitely more comfortable with the business model at this point - especially under an operator like Sokol.

At this point my main concerns are things like:

- industry headwinds
- customer concentration/risk (Yang Ming)
- implications of the very generous carrying value of the boats.

Will have to keep noodling on this one.

Now you got it!  The 15% IRR is achieved by high utilization rates of 96-97% and reduced financing costs through ATCO's model. 

The shipping industry is very similar to Sokol's experience with Netjets...how do you share the cost of transport and increase bookings to very high efficiencies.  If you manage to distribute your financing cost and are efficient on bookings, you get a high capex business that is modestly profitable. 

It creates an internal moat that makes it difficult for competitors to enter the market because they either get the capital costs wrong or can't become efficient enough on the booking side.  A great operator like Sokol is priceless for such businesses and such businesses don't work unless you have a great operator!  Look at Railroads, look at the Airline industry...very much like Shipping...Energy is somewhat similar.  Cheers!

I don't think you can compare shipping and airlines to railroads, real estate and energy. Each sector is capital intensive, but it is far more easier to create a moat in the last 3 sectors than in shipping and airlines.
In railroads, real estate and energy, there basically is a moat because of the location. The infrastructure simply cannot be replicated because of the location limitations or regulation that prohibits it.

With shipping and airlines, there is no such limitation and supply can increase as long as somebody has the money available to fund it. The sector is capital intensive, cyclical and commodotised : a really bad combination.

The only way to create a moat is by  superior operating margins and thus structurally lower operating costs. Since these costs are a smaller percentage of revenue, it's difficult to create or maintain the moat, and even then, results can only be seen on the long term by higher survivability, not necessarily higher profit.
Because of the high capital intesitivity, an operator can easily fool himself by just looking at EBITDA or cash flow and negating the high depreciation. In that way, zombies can go on for a long time, creating bad industry conditions for all participants for a very long time.

It's no coincidence I think that the shipping companies pay such high dividends. The owners want to extract as much money from cash flow as they can, while they can. The shipping families also create their wealth by playing the other financing parties. The markets don't seem to understand the sector's dynamic and appear willing to buy overvalued shares when things go great. On the other hand, banks don't seem to understand it eather and get fooled into financing extra capacity. When things go bad, their collateral disappears and they have no choice but to extend and pretend. This way, the shipping families profit when things are great and pass the buck when thing are less rosy. This way the "shipping dynasties" create their wealth in an otherwise risky and difficult business.

I conceed that Seaspan operates in a somewhat different way, with longtime charters and different financing models. That's why it is my favorite amongst shippers. But still, I think the sector is lousy and not to be compared to other capital intensive businesses as energy or
railways.

For people interested in the sector : a fun book to read is "the shipping man" from Matthew McCleery. Some fictional figures in the book seem to be based on real people in the sector by the way.

In any capital intensive business, the moat is created by being the lowest cost operator...simple!  That's what Sokol is fantastic at.  Already we've seen how they've streamlined operating costs at Seaspan through efficiencies in operations and financing.  If you are the lowest cost operator, you will outlast your competitors.  And as you consolidate portions of the industry, the moat widens.  When Berkshire acquired Mid-American, it accounted for 3-4% of U.S. energy production.  Today, Mid-American (Berkshire Energy) accounts for something like 12-13% of U.S. energy production and the moat widens year after year.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on June 01, 2020, 12:21:34 PM

At this point my main concerns are things like:

- industry headwinds
- customer concentration/risk (Yang Ming)
- implications of the very generous carrying value of the boats.

Will have to keep noodling on this one.

Thrifty, thanks for your thoughts of Atlas/SeaSpan over the last weeks, its been interesting and enlightening to read your posts. What are some of the implications of the very generous carrying value of the boats? Other than an overstated book value - if one is valuing this more along the lines of their contract values/free cash flow, the potentially overstated book value doesn't even really come into play that much. So just curious if there are implications of this that I have not thought through.
Title: Re: ATCO - Atlas Corp
Post by: Xerxes on June 01, 2020, 02:00:28 PM
I had read "the shipping man" from Matthew McCleery some 10 years ago. I think the model there were the shippers and not the lessors, though I may remember wrong.

Think of AerCap model vs. American Airlines.
There are few large lessors (one of them inside the belly of General Electric) while there are many great many airlines.
Title: Re: ATCO - Atlas Corp
Post by: Xerxes on June 01, 2020, 02:05:12 PM
I believe cyclical industries are dream playgrounds for outstanding capital allocators. Seaspan+Sokol=opportunity in my view.

As long as both the investors and the management have the capacity to suffer, to borrow a phrase from Russo.
Which they do for now anyways … would nice for their long term growth potential if they could remove the dividend altogether.

Watsa's $1 billion interest/dividend stream will get hit, but he would indirectly collecting in his percentage ownership of retained earning of Seaspan.
Washington family would probably prefer the cash though.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on June 01, 2020, 02:32:20 PM

At this point my main concerns are things like:

- industry headwinds
- customer concentration/risk (Yang Ming)
- implications of the very generous carrying value of the boats.

Will have to keep noodling on this one.

Thrifty, thanks for your thoughts of Atlas/SeaSpan over the last weeks, its been interesting and enlightening to read your posts. What are some of the implications of the very generous carrying value of the boats? Other than an overstated book value - if one is valuing this more along the lines of their contract values/free cash flow, the potentially overstated book value doesn't even really come into play that much. So just curious if there are implications of this that I have not thought through.

Thanks for the shout out. I really haven't been able to delve into the implications of overstated book value yet, so I'll just let the imagination loose on this one...

They carry the vessels on the books at $5.7 billion.

Page 78 of the annual report says (and, this was pre-covid mind you)...

"Under current market conditions, we intend to continue to hold and operate our vessels. If time charter rates
do not show further improvement
, we expect that our average estimated daily time charter rate used in future
impairment analyses may decline, resulting in estimated undiscounted future operating net cash flows which may be
less than the carrying value of certain of our Panamax-size vessels or below and requiring us to recognize non-cash
impairment charges in the future equal to the excess of the impacted vessels’ carrying value over their fair value."

A large percentage of their fleet will be off charter within the next 2 years, let's call it 40% (though, I believe it represents less than 40% of TEU volume). So there's going to be plenty of visibility into the recession's impact on charter rates and demand.

Much of what they transport is consumer goods. There's a reasonably good chance the world will see depressed demand for consumer goods for at least a couple years, putting downward pressure on shipping demand. And, downward pressure on charter rates. Some (or several) of those boats that go off charter will be re-chartered at lower rates, and others will be idled/scrapped.

Moreover, longer term (say, over the next decade), with increasing trade hostility between China and the US, and more importantly, decreasing US manufacturing costs (automation, free energy from renewables, no tarifs, lower transport costs, rule of law, etc.) I expect further shipping headwinds.

All this leads to a lot of downward pressure on charter rates, and likely impairments (big ones). It seems impairments in this industry are frequent, and when they happen they happen to the tune of hundreds of millions of dollars (Seaspan had some big impairments not too long ago).

Other than just the pain of being in a business with strong headwinds, my concern is at what level of impaired book value would debt covenants trip, forcing an equity raise, and common shareholder dilution? I wouldn't think a billion dollars or more of impairments is a stretch if it takes 3 or 4 years to return to 2019 global shipping levels.
Title: Re: ATCO - Atlas Corp
Post by: petec on June 01, 2020, 02:55:10 PM
Bear in mind Panamax is 5000 TEU, so Panamax and below is very much at the smaller end of Seaspan’s fleet.

Also bear in mind the record low newbuild order book. Demand will grow slower than we are used to, but so will supply, if it grows at all.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on June 03, 2020, 03:06:14 PM
Bear in mind Panamax is 5000 TEU, so Panamax and below is very much at the smaller end of Seaspan’s fleet.

Also bear in mind the record low newbuild order book. Demand will grow slower than we are used to, but so will supply, if it grows at all.

Yes, it's a small percentage of TEU, but I used the example because it's a canary in the coal mine. At peak-economic-cycle, and pre-covid awareness, management was guiding investors to brace for impairments.

They have to routinely assess every boat, large or small, for impairments (the annual report makes that clear). Impairments are based on market rates. Market rates are driven by supply and demand, and we know global demand has taken an unprecedented gut punch.

Seaspan has substantial debt/costs, asset prices that could deteriorate, and limited pricing power.

Seaspan has ~$40 million worth of liabilities Per Boat!

Boats (Vessels) is by far the company’s biggest asset, assigning an average value per boat of ~$48 million!

Boat valuation is based on the lesser of a 30 year straight line depreciation (the boats don’t last 30 years) or the present value of future expected cash flows (heavily influenced by current market rates).

In other words, if today’s market rates are higher than tomorrow’s market rates then it won’t take much for that $48 million of per-boat value to be impaired below the $40 million of per-boat liabilities. The boats will be underwater so to speak.

Now, that exaggerates things a bit, as the company does have other assets, but the point is that their biggest asset’s value is based on something entirely out of the company’s control - market rates.

Probably the most painful lesson I’ve seen repeatedly learned the hard way on this message board over the years is that a business with limited pricing power and significant debt/costs is a time bomb - no matter how reputable the management steering the ship (er the Panamax).

Witnessing the downfall of a company that checks ALMOST all the boxes of sound investing is a miserable experience. Go back about 30 pages on this thread and read up to page 47, where VAL9000 posted “I think this counts as calling it…” You can see those years were quite painful and perplexing for several investors - some that lost substantial amounts of money. Go peruse the Fortress Paper thread or the Sandridge Energy thread (another Fairfax investee) to see similar excruciating experiences.

I’d rather own an index fund than speculate on a fast-growing company with, say, a 5% chance of going bust in the next 20 years. (Zero times anything is zero.)

Is Atco an INVESTMENT in a business that first and foremost is sufficiently indestructible, or is it a very seductive SPECULATION that David Sokol’s talent, the company’s sizable scale advantages, Fairfax’s financial backing, and the company’s recently reported free cash flow are indicative of an ever more prosperous future?

If you don’t know whether equity holders can withstand a 1 in 20 (or 1 in 50) year industry shock then, for me, Atco is speculative.
Title: Re: ATCO - Atlas Corp
Post by: skanjete on June 03, 2020, 11:41:47 PM
Bear in mind Panamax is 5000 TEU, so Panamax and below is very much at the smaller end of Seaspan’s fleet.

Also bear in mind the record low newbuild order book. Demand will grow slower than we are used to, but so will supply, if it grows at all.

Yes, it's a small percentage of TEU, but I used the example because it's a canary in the coal mine. At peak-economic-cycle, and pre-covid awareness, management was guiding investors to brace for impairments.

They have to routinely assess every boat, large or small, for impairments (the annual report makes that clear). Impairments are based on market rates. Market rates are driven by supply and demand, and we know global demand has taken an unprecedented gut punch.

Seaspan has substantial debt/costs, asset prices that could deteriorate, and limited pricing power.

Seaspan has ~$40 million worth of liabilities Per Boat!

Boats (Vessels) is by far the company’s biggest asset, assigning an average value per boat of ~$48 million!

Boat valuation is based on the lesser of a 30 year straight line depreciation (the boats don’t last 30 years) or the present value of future expected cash flows (heavily influenced by current market rates).

In other words, if today’s market rates are higher than tomorrow’s market rates then it won’t take much for that $48 million of per-boat value to be impaired below the $40 million of per-boat liabilities. The boats will be underwater so to speak.

Now, that exaggerates things a bit, as the company does have other assets, but the point is that their biggest asset’s value is based on something entirely out of the company’s control - market rates.

Probably the most painful lesson I’ve seen repeatedly learned the hard way on this message board over the years is that a business with limited pricing power and significant debt/costs is a time bomb - no matter how reputable the management steering the ship (er the Panamax).

Witnessing the downfall of a company that checks ALMOST all the boxes of sound investing is a miserable experience. Go back about 30 pages on this thread and read up to page 47, where VAL9000 posted “I think this counts as calling it…” You can see those years were quite painful and perplexing for several investors - some that lost substantial amounts of money. Go peruse the Fortress Paper thread or the Sandridge Energy thread (another Fairfax investee) to see similar excruciating experiences.

I’d rather own an index fund than speculate on a fast-growing company with, say, a 5% chance of going bust in the next 20 years. (Zero times anything is zero.)

Is Atco an INVESTMENT in a business that first and foremost is sufficiently indestructible, or is it a very seductive SPECULATION that David Sokol’s talent, the company’s sizable scale advantages, Fairfax’s financial backing, and the company’s recently reported free cash flow are indicative of an ever more prosperous future?

If you don’t know whether equity holders can withstand a 1 in 20 (or 1 in 50) year industry shock then, for me, Atco is speculative.

Thrifty,

Although I don't think you can't easily extrapolate the state of affairs of the smaller boat sector to the big boats (these are different markets), but I think your global analysis and conclusion is spot-on!
Title: Re: ATCO - Atlas Corp
Post by: petec on June 04, 2020, 12:43:42 AM
Bear in mind Panamax is 5000 TEU, so Panamax and below is very much at the smaller end of Seaspan’s fleet.

Also bear in mind the record low newbuild order book. Demand will grow slower than we are used to, but so will supply, if it grows at all.

Yes, it's a small percentage of TEU, but I used the example because it's a canary in the coal mine. At peak-economic-cycle, and pre-covid awareness, management was guiding investors to brace for impairments.

They have to routinely assess every boat, large or small, for impairments (the annual report makes that clear). Impairments are based on market rates. Market rates are driven by supply and demand, and we know global demand has taken an unprecedented gut punch.

Seaspan has substantial debt/costs, asset prices that could deteriorate, and limited pricing power.

Seaspan has ~$40 million worth of liabilities Per Boat!

Boats (Vessels) is by far the company’s biggest asset, assigning an average value per boat of ~$48 million!

Boat valuation is based on the lesser of a 30 year straight line depreciation (the boats don’t last 30 years) or the present value of future expected cash flows (heavily influenced by current market rates).

In other words, if today’s market rates are higher than tomorrow’s market rates then it won’t take much for that $48 million of per-boat value to be impaired below the $40 million of per-boat liabilities. The boats will be underwater so to speak.

Now, that exaggerates things a bit, as the company does have other assets, but the point is that their biggest asset’s value is based on something entirely out of the company’s control - market rates.

Probably the most painful lesson I’ve seen repeatedly learned the hard way on this message board over the years is that a business with limited pricing power and significant debt/costs is a time bomb - no matter how reputable the management steering the ship (er the Panamax).

Witnessing the downfall of a company that checks ALMOST all the boxes of sound investing is a miserable experience. Go back about 30 pages on this thread and read up to page 47, where VAL9000 posted “I think this counts as calling it…” You can see those years were quite painful and perplexing for several investors - some that lost substantial amounts of money. Go peruse the Fortress Paper thread or the Sandridge Energy thread (another Fairfax investee) to see similar excruciating experiences.

I’d rather own an index fund than speculate on a fast-growing company with, say, a 5% chance of going bust in the next 20 years. (Zero times anything is zero.)

Is Atco an INVESTMENT in a business that first and foremost is sufficiently indestructible, or is it a very seductive SPECULATION that David Sokol’s talent, the company’s sizable scale advantages, Fairfax’s financial backing, and the company’s recently reported free cash flow are indicative of an ever more prosperous future?

If you don’t know whether equity holders can withstand a 1 in 20 (or 1 in 50) year industry shock then, for me, Atco is speculative.

I won't be at all surprised to see carrying value impairments for the reasons you describe. Later, when rates rise again, book value will not be written back up (because as you state the carrying value is the lesser of 30 year depreciation and NPV). That tells me not to focus too hard on BV.

Would you mind backing up your claim that ships don't last 30 years? My guess is that this varies according to cycle timing. Ships that are, say, 25 at the start of a downcycle will get scrapped early. Ships that are 30 at the start of an upcycle might soldier on to 35. I'd be interested to see data to the contrary, bearing in mind that the last 10 years have seen a prolonged downcycle (vs the 2007 highs) and a huge flood of new, efficient supply. In combination these effects have probably driven above-average mortality rates.

On the quality of Seaspan as a business:
- I think there are some nuances you missed out, such as the role of carefully laddered debt repayment schedules in mitigating risk.
- Great asset allocators have built incredible wealth in cyclical businesses precisely because they are cyclical (in fact you could argue that some of the great fortunes have been built this way).
- There is hindsight bias in your comment about investing in companies that "check ALMOST all the boxes of sound investing". You have picked three examples that suit the point you're making, but if you get the starting valuation right these investments can provide spectacular returns. Getting the starting valuation right in a cyclical business with relatively stable long term demand trends has a lot to do with understanding supply, and the supply outlook here is pretty good.

Other than that you've basically nailed it. This is certainly at the speculative end of my portfolio, and you're right that the equity could be a zero. But it's also one of the cheapest things I own if you assume any kind of operating normality over the long term. I am currently happy enough with that risk/reward, although I am very annoyed with myself that I didn't switch into AerCap when it was trading in the teens - I think the risk/reward was better there for a while.
Title: Re: ATCO - Atlas Corp
Post by: Spekulatius on June 04, 2020, 04:23:17 AM
Quote
The boats will be underwater so to speak.

Quote of the day 😂
Title: Re: ATCO - Atlas Corp
Post by: petec on June 04, 2020, 05:14:21 AM
Quote
The boats will be underwater so to speak.

Quote of the day 😂

Ha! I missed that! Very good.
Title: Re: ATCO - Atlas Corp
Post by: Thrifty3000 on June 04, 2020, 11:18:47 AM
Petec, will you explain the laddered debt repayment schedule? Seaspan debt repayment is one of the key things I flagged that I still need to wrap my mind around.
Title: Re: ATCO - Atlas Corp
Post by: gfp on June 05, 2020, 07:34:28 AM
Heads up, there is some kind of Agora / Oxford Club promotion causing much of this morning's bid in ATCO.
Title: Re: ATCO - Atlas Corp
Post by: bluedevil on June 05, 2020, 02:49:34 PM
I agree there is substantial risk in this investment.  I bought in at $7 a share because I think the management team has the skill to navigate it, but I certainly think there is at least a 1 in 20 chance things end badly.  The rewards should be good though if the company can achieve lowest cost in the industry, which I think it has the scale, financing and operational management to achieve.

The two biggest risks I see and mitigants, which I think the company has done a good job focusing on:

Risk:  Long market slump cycles where charter rates stay low for prolonged period, as ships come off long-term contracts.
   -- Be choosy about acquiring new assets; do it only when returns are good.  Company seems to have instilled this discipline.  It is not ordering new ships and buying ships secondhand when other companies are in distress and with first contracts in place.
        --Sign long-term contracts only when rates are adequate.  When rates are adequate, get as many as you can rather than bet rates go higher.  The company has said that is the strategy.
   -- Invest in counter-cyclical businesses that can keep you going through slumps (like APR).
        -- Don't get over levered.  Company has been de-leveraging since Sokol was installed.

Risk:  Customers are weak and can go bust, evaporating contracts.
        -- Deal with the companies that have implicit state backing or are otherwise the best liners.  Seaspan's customers are very concentrated in four liners. For example, there was discussion on the board about Yang Ming going potentially bust, and they are second largest customer.  The liners are generally weak, and a bust would be very bad.  But if COSCO (China); YM (Taiwan); ONE (Japan) get in trouble, it seems likely they would get state aid, as they historically have.  Just hard to see China or Taiwan letting COSCO or YM go bust, but it is a risk and hopefully Atlas grows and diversifies it could absorb a risk like this materializing.   
The consolidation and alliances that have happened in the shipping industry also mitigate the risk of a firm collapsing. 
Title: Re: ATCO - Atlas Corp
Post by: bluedevil on June 21, 2020, 11:37:46 AM
I went through the annual report and tried to look at when Seaspan's contracted cashflows come off of their current contracts.  Focused on larger boats (8500+) that were not on market rate charters.

2020:  27m
2021:  80m
2022:  150m
2023:  165m
2024:  108m
2025:  170m
2026:  80m

One takeaway for me is that, while the current cratering of market rates will hurt on the smaller ship fleet (which is much more market charter based), it should not severely impact Seaspan in the short run.  Indeed, the more severe the near term pain is, the likely better it is for Seaspan as it should help constrain supply in 2022/2023, when more of the fleet comes off of charter and has to be re-contracted.

That said, when you look at the contract rates for new contracts, they seem to be much less than our existing charter rates, which could lead to big stepdowns in revenue in 2022 and beyond, depending on what the market is doing then.  So right now you are buying Seaspan at a very low multiple of earnings, but the viability of their current revenue in the future is shaky, and that's concerning given the amount of debt the company carries. 
Title: Re: ATCO - Atlas Corp
Post by: gfp on July 23, 2020, 08:39:45 AM
Press release out today (attached)

Here's a link that doesn't require a download:
https://www.prnewswire.com/news-releases/seaspan-announces-acquisition-of-two-high-quality-containerships-on-long-term-charter-301098557.html
Title: Re: ATCO - Atlas Corp
Post by: Saluki on August 11, 2020, 06:45:33 AM
Atlas Corp beats earnings estimates, it's up about 10% today on the news.

https://finance.yahoo.com/news/atlas-atco-q2-earnings-revenues-124512574.html

I was buying some of this on the dips and it didn't disappoint :)
Title: Re: ATCO - Atlas Corp
Post by: petec on August 14, 2020, 12:14:48 AM
I'm genuinely impressed by this quarter from Atlas.

In (probably) the steepest recession in history, when idle ships as a % of the fleet hit an all time high, they basically emerged unscathed. They did not have ships idled and their customers paid. You wouldn't know coronavirus happened looking at their cash flows. It is just possible that some of the company has been right to argue that 1) they are creating a competitive advantage through flexibility and service, and 2) the industry is becoming more rational as it consolidates. I have previously been sceptical on both points, but now I'm thinking maybe.

Annualised FFO came in at $644m, and run rate FFO is probably a few tens of millions higher (allowing for ships acquired recently and the full impact of the Mexicali deployment at APR). FFO is a flawed metric, because it doesn't include depreciation, and these assets definitely depreciate. But in the context of a $2.1bn market cap, $650-700m of FFO seems a bit silly. Some of the best capital allocators in history can redeploy cash flows equal to the entire market cap in three years.

The new data on ebitda/cost for acquisitions is also flawed (I am no fan of ebitda) but one can play with assumptions and come up with contracted, levered ROE's over 20%.

Also, my guess is coronavirus has delayed demand by a year or so but may have delayed supply (which was low anyway) by longer, simply because demand can spring back faster than deliveries can. There might well be a demand shock and a spike in dayrates in 12-24 months, and Seaspan would have quite a bit of exposure to this as short term leases roll. I would not pay much for this optionality, but I don't think I have to.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on August 14, 2020, 12:22:36 AM
I'm genuinely impressed by this quarter from Atlas.

In (probably) the steepest recession in history, when idle ships as a % of the fleet hit an all time high, they basically emerged unscathed. They did not have ships idled and their customers paid. You wouldn't know coronavirus happened looking at their cash flows. It is just possible that some of the company has been right to argue that 1) they are creating a competitive advantage through flexibility and service, and 2) the industry is becoming more rational as it consolidates. I have previously been sceptical on both points, but now I'm thinking maybe.

Annualised FFO came in at $644m, and run rate FFO is probably a few tens of millions higher (allowing for ships acquired recently and the full impact of the Mexicali deployment at APR). FFO is a flawed metric, because it doesn't include depreciation, and these assets definitely depreciate. But in the context of a $2.1bn market cap, $650-700m of FFO seems a bit silly. Some of the best capital allocators in history can redeploy cash flows equal to the entire market cap in three years.

The new data on ebitda/cost for acquisitions is also flawed (I am no fan of ebitda) but one can play with assumptions and come up with contracted, levered ROE's over 20%.

Also, my guess is coronavirus has delayed demand by a year or so but may have delayed supply (which was low anyway) by longer, simply because demand can spring back faster than deliveries can. There might well be a demand shock and a spike in dayrates in 12-24 months, and Seaspan would have quite a bit of exposure to this as short term leases roll. I would not pay much for this optionality, but I don't think I have to.

As impressive as the quarter was in terms of Seaspan, how they've integrated APR so quickly and found efficiencies is as amazing!  The more I listen to Bing, the more I'm impressed with his abilities.  They are building out management, looking for opportunity, but pointed out that near-term cash flows will be spent on buybacks as long as valuations are where they are. 

I would be quite happy if Fairfax allocated more capital to Sokol and Chen, rather than ideas like Blackberry.  Another $2-3B in Atlas Corp's hands would make me thrilled as a Fairfax shareholder!  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on August 14, 2020, 01:41:12 AM
I'm genuinely impressed by this quarter from Atlas.

In (probably) the steepest recession in history, when idle ships as a % of the fleet hit an all time high, they basically emerged unscathed. They did not have ships idled and their customers paid. You wouldn't know coronavirus happened looking at their cash flows. It is just possible that some of the company has been right to argue that 1) they are creating a competitive advantage through flexibility and service, and 2) the industry is becoming more rational as it consolidates. I have previously been sceptical on both points, but now I'm thinking maybe.

Annualised FFO came in at $644m, and run rate FFO is probably a few tens of millions higher (allowing for ships acquired recently and the full impact of the Mexicali deployment at APR). FFO is a flawed metric, because it doesn't include depreciation, and these assets definitely depreciate. But in the context of a $2.1bn market cap, $650-700m of FFO seems a bit silly. Some of the best capital allocators in history can redeploy cash flows equal to the entire market cap in three years.

The new data on ebitda/cost for acquisitions is also flawed (I am no fan of ebitda) but one can play with assumptions and come up with contracted, levered ROE's over 20%.

Also, my guess is coronavirus has delayed demand by a year or so but may have delayed supply (which was low anyway) by longer, simply because demand can spring back faster than deliveries can. There might well be a demand shock and a spike in dayrates in 12-24 months, and Seaspan would have quite a bit of exposure to this as short term leases roll. I would not pay much for this optionality, but I don't think I have to.

As impressive as the quarter was in terms of Seaspan, how they've integrated APR so quickly and found efficiencies is as amazing!  The more I listen to Bing, the more I'm impressed with his abilities.  They are building out management, looking for opportunity, but pointed out that near-term cash flows will be spent on buybacks as long as valuations are where they are. 

I would be quite happy if Fairfax allocated more capital to Sokol and Chen, rather than ideas like Blackberry.  Another $2-3B in Atlas Corp's hands would make me thrilled as a Fairfax shareholder!  Cheers!

I agree with all but your last. Over-concentrating in a levered entity is never a good risk-adjusted idea in my view.

On APR - what makes you think they have found efficiencies fast? Ebitda guidance has not changed since the deal closed, and the major impact to ebitda growth has been Mexicali which was in place before the deal closed. I think it will be a great deal, but I don't see evidence that Atlas has made a big difference yet. Am I wrong?
Title: Re: ATCO - Atlas Corp
Post by: petec on August 14, 2020, 01:42:34 AM
Actually - I will check this - I think they explicitly said that near term cash flows would *not* be used for buybacks. The immediate priority is investment grade. Buybacks follow, if the stock is still cheap.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on August 14, 2020, 03:35:51 PM
Actually - I will check this - I think they explicitly said that near term cash flows would *not* be used for buybacks. The immediate priority is investment grade. Buybacks follow, if the stock is still cheap.

Seaspan was raised to investment grade August 10th.  They said on the call...specifically David said...that dividend increases were not on the horizon, and while they are always looking at opportunities, buybacks would be more likely if valuations stay low and they maintain their current level of liquidity.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on August 15, 2020, 12:47:52 AM
Actually - I will check this - I think they explicitly said that near term cash flows would *not* be used for buybacks. The immediate priority is investment grade. Buybacks follow, if the stock is still cheap.

Seaspan was raised to investment grade August 10th.  They said on the call...specifically David said...that dividend increases were not on the horizon, and while they are always looking at opportunities, buybacks would be more likely if valuations stay low and they maintain their current level of liquidity.  Cheers!

He’s referring to stock liquidity, not balance sheet liquidity. In that context he says buybacks are more likely than issuances unless they find an acquisition where they get more than they give, but that “maintaining our capital and continuing to grow the business” would be the priority and share repurchases would “probably be well into the future”.

Seaspan was raised to IG by one agency, but the impression I have is they want it for the holdco also. Could be wrong.
Title: Re: ATCO - Atlas Corp
Post by: bluedevil on August 15, 2020, 05:20:01 PM
Seaspan was not raised to investment grade, though the press release gave that impression.  One of Seaspan's credit facilities - their most important one - was raised to investment grade by Kroll.  The corporate credit rating is still a rung below investment grade.  It is definitely the company's stated goal to secure a corporate investment grade rating and to issue unsecured investment grade debt.

Atlas should be a very steady performer through the next 18 months - more than 85% of their revenue is locked in during that period.  The biggest variable for Atlas is what will charter rates look like in 2022-2025, when they have almost 600m of annual revenue coming off long-term charters and will need to re-charter the ships.  I think that is the risk that causes the stock to trade at cheap multiples.

   
Title: Re: ATCO - Atlas Corp
Post by: petec on August 15, 2020, 05:48:40 PM
Seaspan was not raised to investment grade, though the press release gave that impression.  One of Seaspan's credit facilities - their most important one - was raised to investment grade by Kroll.  The corporate credit rating is still a rung below investment grade.  It is definitely the company's stated goal to secure a corporate investment grade rating and to issue unsecured investment grade debt.

Atlas should be a very steady performer through the next 18 months - more than 85% of their revenue is locked in during that period.  The biggest variable for Atlas is what will charter rates look like in 2022-2025, when they have almost 600m of annual revenue coming off long-term charters and will need to re-charter the ships.  I think that is the risk that causes the stock to trade at cheap multiples.

   

You’re right on both.
Title: Re: ATCO - Atlas Corp
Post by: Xerxes on August 16, 2020, 07:15:39 PM
I would be quite happy if Fairfax allocated more capital to Sokol and Chen, rather than ideas like Blackberry.  Another $2-3B in Atlas Corp's hands would make me thrilled as a Fairfax shareholder!  Cheers!

Parsad, i am happy with that too, however with a market value of $2.1 billion, that would be a lot of equity issuance and warrants to get $2 billion injected into Atlas.

Fairfax would have more than just a concentrated position, it will be close to wholly owned with the Washington family that didn't participate in the issuance as shrunken minority. It will probably be consolidated from an accounting point of view, and for all intent and purpose, it will its "second" business next to insurance.

Even with APR folded in, the bulk of revenues come from Seaspan line of business. $1.2 billion sales vs. $220 million for APR.
A lot of more diversification needs to happen, before for FFH to take a bigger chunk.

 
Title: Re: ATCO - Atlas Corp
Post by: gary17 on September 09, 2020, 07:23:33 AM
does anyone know if the rates are getting better.  I read some anecdotal report in a mandarin news article that the virus and continued lock down on flights means shipping rates are better... not sure if this translates to something positive for Seaspan.
thanks!
Gary
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on September 09, 2020, 08:28:11 AM
does anyone know if the rates are getting better.  I read some anecdotal report in a mandarin news article that the virus and continued lock down on flights means shipping rates are better... not sure if this translates to something positive for Seaspan.
thanks!
Gary
The vast majority of their revenues are long term charters I doubt this will affect them in the short term but as contracts roll off in the next few years the spot rate will be important in pricing for renewing long term charters.
Title: Re: ATCO - Atlas Corp
Post by: petec on September 09, 2020, 08:39:55 AM
Short answer is yes. It varies by route and ship size though.

True they’re largely on long term contracts. But they have a decent chunk (especially in smaller, older ships) on shorter term contracts. And they also have a small number of long term contracts at spot, an innovation they patted themselves on the back for last year.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on September 09, 2020, 06:05:29 PM
Article on ATCO/Seaspan from Business in Vancouver.  Cheers!

https://biv.com/article/2020/09/shippings-new-imperative-continual-crisis-management?utm_source=BIV+Newsletters%2C+effective+July+1%2C+2017&utm_campaign=3f4283fe83-EMAIL_CAMPAIGN_2020_09_08_06_20_COPY_01&utm_medium=email&utm_term=0_c5e00a74ef-3f4283fe83-211177161
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on September 11, 2020, 10:45:38 AM
https://seekingalpha.com/pr/18003000-atlas-corp-announces-departure-of-chief-financial-officer

Not sure what to make of this. Any thoughts?
Title: Re: ATCO - Atlas Corp
Post by: gfp on September 11, 2020, 11:29:40 AM
I assume he will move on to another venture of Sokol's but I don't know.  Ryan has been with Sokol from the MidAmerican days, checking out BYD for MidAmerican, working with Sokol at NetJets, working at the spirits company Sokol just sold to Diageo (the Aviation Gin parent Davos) and Seaspan / Atlas.  After all that, you would assume he sticks with Teton / Sokol but who knows.  Its quite the resume for a young guy so far.  Fluent in Mandarin as well.

edit - he did part ways with Sokol for a few years at Falcon Edge Capital I see.
Title: Re: ATCO - Atlas Corp
Post by: WneverLOSE on September 11, 2020, 10:06:28 PM
From his LinkedIn :
Quote
A heartfelt thank you to all of those who have been a part of the Atlas/Seaspan journey.

Since the beginning of 2018, we have transformed Seaspan’s balance sheet raising over $4bn of capital, executed on over $3bn of acquisitions, and reorganized Seaspan into the global asset manager, Atlas Corp. The Atlas team behind these achievements is incredibly talented — it was a privilege to work with and learn from all of you.

While I will miss the team and the organization we built, I am excited to pursue my next adventure. Stay tuned for more details with the upcoming announcement as our family makes the move to Seattle!


He is definitely a very talented individual, will be very interesting to see what the future holds for him.
Title: Re: ATCO - Atlas Corp
Post by: petec on September 12, 2020, 02:38:20 AM
From his LinkedIn :
Quote
A heartfelt thank you to all of those who have been a part of the Atlas/Seaspan journey.

Since the beginning of 2018, we have transformed Seaspan’s balance sheet raising over $4bn of capital, executed on over $3bn of acquisitions, and reorganized Seaspan into the global asset manager, Atlas Corp. The Atlas team behind these achievements is incredibly talented — it was a privilege to work with and learn from all of you.

While I will miss the team and the organization we built, I am excited to pursue my next adventure. Stay tuned for more details with the upcoming announcement as our family makes the move to Seattle!


He is definitely a very talented individual, will be very interesting to see what the future holds for him.

Yes. My guess is the early days at Seaspan were fascinating as a CFO but it’s now rather more mundane. Surprised it’s so fast though.
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on September 12, 2020, 08:18:14 AM
From his LinkedIn :
Quote
A heartfelt thank you to all of those who have been a part of the Atlas/Seaspan journey.

Since the beginning of 2018, we have transformed Seaspan’s balance sheet raising over $4bn of capital, executed on over $3bn of acquisitions, and reorganized Seaspan into the global asset manager, Atlas Corp. The Atlas team behind these achievements is incredibly talented — it was a privilege to work with and learn from all of you.

While I will miss the team and the organization we built, I am excited to pursue my next adventure. Stay tuned for more details with the upcoming announcement as our family makes the move to Seattle!


He is definitely a very talented individual, will be very interesting to see what the future holds for him.

Yes. My guess is the early days at Seaspan were fascinating as a CFO but it’s now rather more mundane. Surprised it’s so fast though.
I suppose it must have been exciting at the beginning to plug the leaks but now that it's ship shape maybe container shipping is too mundane for such a motivated and talented individual. I thought he would stick around for the capital allocation and the deal making but perhaps he realizes it will all flow through Bing. Pure speculation but I will be interested to follow him and what he does.
Title: Re: ATCO - Atlas Corp
Post by: Saluki on September 30, 2020, 07:20:20 AM
Seaspan acquires two more containerships operating under long term charters:

https://finance.yahoo.com/news/seaspan-announces-continued-growth-acquiring-112800776.html

Expected to add $20mm to 2020 ebitda.  Not groundbreaking news, but the kind of consistent blocking and tackling and slowly moving the ball forward that I like to see :)
Title: Re: ATCO - Atlas Corp
Post by: petec on September 30, 2020, 08:15:37 AM
Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

Title: Re: ATCO - Atlas Corp
Post by: Parsad on September 30, 2020, 02:21:16 PM
Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

Sokol grew Mid-American at a 23% ROE for about 20 years.  His strength is capital-intensive businesses and making them very efficient.  Bing is no slouch either!  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on September 30, 2020, 02:34:43 PM
Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

Sokol grew Mid-American at a 23% ROE for about 20 years.  His strength is capital-intensive businesses and making them very efficient.  Bing is no slouch either!  Cheers!

Yes. I’ve never really trusted that number because my source is Prem and I think he can be a bit sloppy with figures. But Sokol is definitely one of my big reasons for owning Atlas.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on September 30, 2020, 03:22:26 PM
Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

Sokol grew Mid-American at a 23% ROE for about 20 years.  His strength is capital-intensive businesses and making them very efficient.  Bing is no slouch either!  Cheers!

Yes. I’ve never really trusted that number because my source is Prem and I think he can be a bit sloppy with figures. But Sokol is definitely one of my big reasons for owning Atlas.

Actually, all you have to do is look at what Mid-American was earning when Berkshire acquired it in 1999 ($104M) and what it was making in 2010, shortly before Sokol left...$1,131M.  That's about 26% annualized over 10 years in earnings growth.  He essentially did the same thing 10 years earlier growing earnings from $10M to $104M.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: ourkid8 on September 30, 2020, 09:04:11 PM
Why is Atlas Corp even paying a dividend when David can allocate capital at such a high rate of return? It makes no sense...

Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on September 30, 2020, 10:28:04 PM
Why is Atlas Corp even paying a dividend when David can allocate capital at such a high rate of return? It makes no sense...

Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

I agree!  Probably two reasons for the dividend...legacy dividend from Seaspan...Washington family may want an income stream without selling any more equity.  Fat dividend now, but I suspect it will grow slowly in the future, and will probably drop to about 2.5-3% as the stock hits fair value...$14-15.  Cheers!
Title: Re: ATCO - Atlas Corp
Post by: petec on September 30, 2020, 11:00:38 PM
Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

Sokol grew Mid-American at a 23% ROE for about 20 years.  His strength is capital-intensive businesses and making them very efficient.  Bing is no slouch either!  Cheers!

Yes. I’ve never really trusted that number because my source is Prem and I think he can be a bit sloppy with figures. But Sokol is definitely one of my big reasons for owning Atlas.

Actually, all you have to do is look at what Mid-American was earning when Berkshire acquired it in 1999 ($104M) and what it was making in 2010, shortly before Sokol left...$1,131M.  That's about 26% annualized over 10 years in earnings growth.  He essentially did the same thing 10 years earlier growing earnings from $10M to $104M.  Cheers!

Well, no. You also have to look at whether Berkshire contributed capital during that time. I’m sure you and others know the answer, but I don’t, which is why I take the CAGR as unproven!
Title: Re: ATCO - Atlas Corp
Post by: petec on September 30, 2020, 11:06:29 PM
Why is Atlas Corp even paying a dividend when David can allocate capital at such a high rate of return? It makes no sense...

Yes, it's interesting. This brings them to $690m of cash deployed this year (not counting deals announced in 2019 but closed in 2020). That's substantiallly all of 2020 operating cash flows, so cash is being deployed at a prodigious rate.

The last two deals involve four ships, built in 2011, 2012, 2018, and 2018, purchased for a total of $322m. Both deals generate a current run rate of $20m in ebitda, for $40m in total. Without knowing the lease details we can't calculate an IRR, but:
- If you assume 70% debt financing at 5% and a 20% tax rate (well above the corporate average) you get an ROE of 24% at the current run rate. If these flows are maintained for 4 years, equity is repaid.
- Total contracted revenues for the two deals are about $320. Assuming Seaspan's corporate average ebitda margin of 63% (using low end of 2020 guidance range) that's $200m in ebitda, or 5 years at the current run rate, acquired for $176m.

I agree!  Probably two reasons for the dividend...legacy dividend from Seaspan...Washington family may want an income stream without selling any more equity.  Fat dividend now, but I suspect it will grow slowly in the future, and will probably drop to about 2.5-3% as the stock hits fair value...$14-15.  Cheers!

Agreed. And it won’t just be the Washingtons. There’s another big shareholder that needs cash flow, as discussed extensively on this board.

But also: while the hypothetical ROEs look great, I did point out that we don’t know the real IRR because we don’t know the lease terms (nor, indeed, the rates the ships will earn when the leases end). Also, these assets have *relatively* short-lives, and an x% ROE on a short lived asset is much less valuable than the same ROE on a long-lived one. Treat my maths as a paper exercise only.
Title: Re: ATCO - Atlas Corp
Post by: petec on October 01, 2020, 02:30:46 AM
@Parsad, I don't think you answered this question upthread and I'd be really interested in your thoughts.

On APR - what makes you think they have found efficiencies fast? Ebitda guidance has not changed since the deal closed, and the major impact to ebitda growth has been Mexicali which was in place before the deal closed. I think it will be a great deal, but I don't see evidence that Atlas has made a big difference yet. Am I wrong?
Title: Re: ATCO - Atlas Corp
Post by: Kokomo on October 01, 2020, 12:10:35 PM
https://www.eagleview.com/newsroom/2020/10/eagleview-hires-ryan-courson-chief-financial-officer/

BELLEVUE, Wash., October 1, 2020 – EagleView, a leading technology provider of aerial imagery, data analytics and GIS solutions, today announced the appointment of Ryan Courson as Chief Financial Officer. At EagleView, Courson will report to CEO Chris Jurasek, and will lead the finance, corporate development, and legal organizations.
Title: Re: ATCO - Atlas Corp
Post by: Parsad on October 01, 2020, 07:57:42 PM
@Parsad, I don't think you answered this question upthread and I'd be really interested in your thoughts.

On APR - what makes you think they have found efficiencies fast? Ebitda guidance has not changed since the deal closed, and the major impact to ebitda growth has been Mexicali which was in place before the deal closed. I think it will be a great deal, but I don't see evidence that Atlas has made a big difference yet. Am I wrong?

https://www.bizjournals.com/jacksonville/news/2020/08/14/apr-energy-laying-off-50-employees.html

https://www.fool.com/earnings/call-transcripts/2020/08/11/atlas-corp-atco-q2-2020-earnings-call-transcript/

Please turn to Slide 7, where I will provide APR developments for the quarter. As we communicated at our 2019 Investor Day, we see tremendous upside potential in APR, and are working toward transforming the business to the next level. I'm very pleased to announce the recent appointment of Brian Rich as the President and COO. Brian has deep expertise and networks in the global energy and power sector and was formerly President and COO of APR between 2012 and 2015. Brian is well aligned with APR's priority focus going forward, and we are confident in his leadership to drive APR's operational excellence and sustainable growth.

APR's power fleet utilization for Q2 was supported by mobilization of eight turbines across three power plants in Mexicali. These eight turbines contributed $12 million of revenue in Q2, and we expect these projects to contribute approximately $41 million of adjusted EBITDA during 2020. Due to the mobile and fast power nature of the APR's fleet, we expect the utilization to fluctuate as these turbines are put on different contracts around the world. However, we are confident in our ability to maintain a strong utilization.

While COVID-19 has impacted APR's business through a reduction in overall global power consumption, we continue to structure the business as a long-term oriented energy solution provider. Our priority is to sustain and improve asset utilization, while focusing on extending the duration of existing contracts. This will require a shift in focus of our partnerships and solution offerings.

In addition, we will continue to be more selective on potential deployment opportunities around the world that meet our risk management criteria. We also continue to execute on our business strategy with strong commitment to ESG, divesting idle diesel generators and making operational improvements. Just to highlight, during the Q2, APR's overall plant availability was maintained at over 98% and an LTIR of 0.72.


Further down:

APR is a business secured by medium-term contracts with strong upside as additional capacity is deployed either on additional long-term projects or lucrative short-term fast track power solutions. While the decline in power consumption from COVID has slowed down our pipeline of potential projects, Brian Rich and his team are focused on deploying our assets and building a high quality pipeline of global opportunities.

Down further:

Bing Chen -- President and Chief Executive Officer

Yes Michael, I think the way to -- that's why I think the way we look at the APR business to a certain extent is similar to Seaspan's is that we're going to work on both opportunities to improve the utilization. One is through the extension. The other one is through the new business opportunities. As you know, that APR's fleet is more than half, it's under long-term contract. The current COVID obviously has certain impact in terms of the reductions to overall -- the power consumption. However, I think we believe it's temporarily slowing down the decision-making process and also of course result in some, I think, cancellation of the projects. For example, back in May, the Puerto Rico prefer had a demand for about 350 megawatts of power. But due to this COVID and for the peak season, they did not need to have this power, so therefore there are certain impacts.

However, I think as we continue to working on both the existing type of opportunities, that the management team are working on other opportunities such as flare -- we started looking at other opportunities such as flare to gas, LPG, and other grid stabilization, so to broaden our portfolio of offerings, so therefore, that we will have more opportunities to get the turbines utilized. So over the period, I think we are still confident we will be able to improve the turbines' utilization through the expansion and also the new opportunities.

Ryan Courson -- Chief Financial Officer

And then Michael, just as a clarification, for the third quarter pro forma for the Mexicali, what you'll see is 80% utilization for the APR power utilization fleet.


Cheers!
Title: Re: ATCO - Atlas Corp
Post by: Xerxes on October 28, 2020, 09:10:04 PM
https://www.economist.com/business/2020/10/10/how-covid-19-put-wind-in-shipping-companies-sails

"Shipping is a business where, in the words of Martin Stopford of Clarksons, firms “make a living and occasionally make a killing”. This year, it appears, belongs to the second category. What is going on?"

Title: Re: ATCO - Atlas Corp
Post by: ourkid8 on November 09, 2020, 01:52:28 PM
Q3 2020 earnings released.

https://ir.atlascorporation.com/press-releases
Title: Re: ATCO - Atlas Corp
Post by: Sparky627 on November 09, 2020, 02:17:11 PM
BV=14.57/sh
Title: Re: ATCO - Atlas Corp
Post by: nwoodman on November 10, 2020, 12:25:52 PM
https://www.zerohedge.com/markets/la-box-signal-spikes-and-charter-rates-go-through-roof

Charter rates highest since 2011

Another market indicator is container-ship charter rates. Carrier fleets are a mix of owned and leased vessels. Leases can last for months or years. The more capacity carriers need to service future cargo demand, the higher the charter rates and the longer the charter durations.

Alphaliner reported this week that charter rates have gone “through the roof,” with rates “rising quickly for all ship types on the back of increasingly tight supply.”

It said that the 7,500- to 11,000-TEU segment remains sold out, as do the 5,300- to 7,499-, wide-bream 4,300- to 5,499-TEU, and the 3,000- to 3,999-TEU segments.


Few container ships left to charter (Photo: Kees Torn/Flickr)
The classic Panamax 4,000- to 5,299-TEU segment “is nearly sold out” and “is seeing charter rates that would have been unthinkable only a few months ago,” said Alphaliner.

Hapag-Lloyd chartered the 5,039-TEU CSL Manhattan for five to six months at $25,000 per day, “a rate level unseen for this class of ship since 2011,” noted Alphaliner. It also reported a 12-month charter of a 4,400-TEU vessel at $19,750 per day, up 11% from what a comparable ship went for two weeks before. “Similar tonnage is now being discussed at over $20,000 a day,” noted Alphaliner.

Tonnage available to charter is vanishing. According to Alphaliner, there are only 107 ships inactive, totaling 378,802 TEUs, representing just 1.6% of the total global fleet.

Of those, 13 ships (55,198 TEU) are sanctioned Iranian ships and nine (73,990 TEU) are at the yards for maintenance of scrubber retrofits. Excluding those categories, the inactive fleet is a mere 1.05% of the world total.


Industry pricing power is a lot stronger than what I had expected.

“Seaspan's current operating fleet of 125 vessels has an average age of approximately seven years and an average remaining lease period of approximately four years, on a TEU-weighted basis.”

Cheers

nwoodman
Title: Re: ATCO - Atlas Corp
Post by: ourkid8 on November 11, 2020, 07:43:46 AM
85% of their 2021 revenue is under long-term contracts so that means 15% will benefit off higher rates! If Seaspan can lock in these higher rates under long term contracts, this will be a big win for us shareholders!!! I am very bullish on the prospects and direction of this company. 

https://www.zerohedge.com/markets/la-box-signal-spikes-and-charter-rates-go-through-roof

Charter rates highest since 2011

Another market indicator is container-ship charter rates. Carrier fleets are a mix of owned and leased vessels. Leases can last for months or years. The more capacity carriers need to service future cargo demand, the higher the charter rates and the longer the charter durations.

Alphaliner reported this week that charter rates have gone “through the roof,” with rates “rising quickly for all ship types on the back of increasingly tight supply.”

It said that the 7,500- to 11,000-TEU segment remains sold out, as do the 5,300- to 7,499-, wide-bream 4,300- to 5,499-TEU, and the 3,000- to 3,999-TEU segments.


Few container ships left to charter (Photo: Kees Torn/Flickr)
The classic Panamax 4,000- to 5,299-TEU segment “is nearly sold out” and “is seeing charter rates that would have been unthinkable only a few months ago,” said Alphaliner.

Hapag-Lloyd chartered the 5,039-TEU CSL Manhattan for five to six months at $25,000 per day, “a rate level unseen for this class of ship since 2011,” noted Alphaliner. It also reported a 12-month charter of a 4,400-TEU vessel at $19,750 per day, up 11% from what a comparable ship went for two weeks before. “Similar tonnage is now being discussed at over $20,000 a day,” noted Alphaliner.

Tonnage available to charter is vanishing. According to Alphaliner, there are only 107 ships inactive, totaling 378,802 TEUs, representing just 1.6% of the total global fleet.

Of those, 13 ships (55,198 TEU) are sanctioned Iranian ships and nine (73,990 TEU) are at the yards for maintenance of scrubber retrofits. Excluding those categories, the inactive fleet is a mere 1.05% of the world total.


Industry pricing power is a lot stronger than what I had expected.

“Seaspan's current operating fleet of 125 vessels has an average age of approximately seven years and an average remaining lease period of approximately four years, on a TEU-weighted basis.”

Cheers

nwoodman
Title: Re: ATCO - Atlas Corp
Post by: nwoodman on December 07, 2020, 02:08:56 PM
Seaspan announces that it has entered into purchase orders to build five high-quality 12,200 TEU containerships. Upon completion and delivery, all five vessels will commence long-term charters with a leading global liner company and are subject to vessel purchase obligations at the conclusion of the charters.

https://filecache.investorroom.com/mr5ircnw_seaspan/1034/download/Newbuild%20Project%20v00F%2020201207.pdf
Title: Re: ATCO - Atlas Corp
Post by: petec on December 10, 2020, 01:24:06 AM
Loadstar.com speculates the newbuild customer is MSC: https://theloadstar.com/msc-buys-more-second-hand-ships-and-may-be-eyeing-seaspan-newbuilds/

The article also quotes London-based shipbroker Braemar ACM as saying that there is “aggressive buying interest” from carriers. MSC has apparently spent $260m on 13 small/mid sized ships since August.

It seems to me there is a clear shortage of supply in everything but the largest vessels.
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on December 10, 2020, 06:21:02 AM
Loadstar.com speculates the newbuild customer is MSC: https://theloadstar.com/msc-buys-more-second-hand-ships-and-may-be-eyeing-seaspan-newbuilds/

The article also quotes London-based shipbroker Braemar ACM as saying that there is “aggressive buying interest” from carriers. MSC has apparently spent $260m on 13 small/mid sized ships since August.

It seems to me there is a clear shortage of supply in everything but the largest vessels.

One thing I'm wondering about is why MSC is doing this "through" Atlas? They are allowing Atlas to capture some of the value by doing this long-term lease with an option to buy it at the end. Why not just buy the ships themselves?
Title: Re: ATCO - Atlas Corp
Post by: Castanza on December 10, 2020, 06:42:19 AM
Loadstar.com speculates the newbuild customer is MSC: https://theloadstar.com/msc-buys-more-second-hand-ships-and-may-be-eyeing-seaspan-newbuilds/

The article also quotes London-based shipbroker Braemar ACM as saying that there is “aggressive buying interest” from carriers. MSC has apparently spent $260m on 13 small/mid sized ships since August.

It seems to me there is a clear shortage of supply in everything but the largest vessels.

One thing I'm wondering about is why MSC is doing this "through" Atlas? They are allowing Atlas to capture some of the value by doing this long-term lease with an option to buy it at the end. Why not just buy the ships themselves?

I was wondering this too. Is there an obligation ("carrier committed") or "option "to purchase these ships at the end of the lease? The article worded it both ways. It's hard to think of an advantage MSC would gain from this other than potentially skipping out on maintenance costs?
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 10, 2020, 06:44:26 AM
Loadstar.com speculates the newbuild customer is MSC: https://theloadstar.com/msc-buys-more-second-hand-ships-and-may-be-eyeing-seaspan-newbuilds/

The article also quotes London-based shipbroker Braemar ACM as saying that there is “aggressive buying interest” from carriers. MSC has apparently spent $260m on 13 small/mid sized ships since August.

It seems to me there is a clear shortage of supply in everything but the largest vessels.

One thing I'm wondering about is why MSC is doing this "through" Atlas? They are allowing Atlas to capture some of the value by doing this long-term lease with an option to buy it at the end. Why not just buy the ships themselves?
Less capital intensity, no residual risk. To earn a higher return on their capital. Ship leasing is as old as the industry.
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 10, 2020, 06:45:07 AM
"are subject to vessel purchase obligations at the conclusion of the charters."

I don't know anything about MSC but wouldn't the usual reasons be to keep the debt off their balance sheet, relative borrowing costs between Atlas and MSC, MSC leverage ratios, etc...?  MSC is taking the residual risk here, not Atlas
Title: Re: ATCO - Atlas Corp
Post by: kab60 on December 10, 2020, 06:58:20 AM
"are subject to vessel purchase obligations at the conclusion of the charters."

I don't know anything about MSC but wouldn't the usual reasons be to keep the debt off their balance sheet, relative borrowing costs between Atlas and MSC, MSC leverage ratios, etc...?  MSC is taking the residual risk here, not Atlas
Yes, I didn't look into the details of the transaction (who has residual risk), but it is basically two different business models with different costs of capital. Most liners are trying to optimize their balance sheet and return an adequate return on their capital, and reducing the capital employed and the capex is a major part in that.
Title: Re: ATCO - Atlas Corp
Post by: gary17 on December 16, 2020, 06:40:10 AM
down 12%!
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 16, 2020, 06:51:04 AM
I wonder if the drop has more to do with the disclosure that Fairfax is parting with some Atlas securities in the Riverstone Europe divestiture than people hedging convertible exposure.  This doesn't seem like a big deal either way but volatility is always appreciated.

https://www.sec.gov/Archives/edgar/data/1794846/000156459020057216/atco-6k_20200930.htm
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on December 16, 2020, 07:58:10 AM
How are the quarterly results being perceived? It doesn't seem bad or surprising to me - but maybe I'm missing something.

What is going on with the Fairfax Riverstone Europe divestiture - are they selling some of their preferreds/convertibles?
Title: Re: ATCO - Atlas Corp
Post by: Cigarbutt on December 16, 2020, 08:36:21 AM
^Riverstone UK, the previously 100%-owned insurance runoff sub, was deconsolidated last year during the first part of the sale (formation of a joint venture) and now the assets and liabilities will be 100%-owned by another party in early 2021. In short, this means that ≈ 2.7B of portfolio investments will be 'transferred' along the matching ≈ 2.3B insurance liability contracts. It seems FFH has the ability to decide if they transfer the Atlas securities or if they replace those assets with equivalent fair value. FFH can shuffle portfolio investments around, depending on various criteria.
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 16, 2020, 08:49:24 AM
This is the press release on today's notes offering, fwiw:
https://www.sec.gov/Archives/edgar/data/1794846/000156459020057216/atco-ex992_431.htm
Title: Re: ATCO - Atlas Corp
Post by: gary17 on December 16, 2020, 08:58:28 AM
this is all very complex stuff for me to comprehend...   seems like market is saying b/c of these events  ATCO is worth 12% less
Title: Re: ATCO - Atlas Corp
Post by: hasilp89 on December 16, 2020, 12:45:42 PM
this is all very complex stuff for me to comprehend...   seems like market is saying b/c of these events  ATCO is worth 12% less

any time prem is involved it gets confusing...
Title: Re: ATCO - Atlas Corp
Post by: Nelg on December 16, 2020, 01:42:36 PM
Agreed. And it won’t just be the Washingtons. There’s another big shareholder that needs cash flow, as discussed extensively on this board.

But also: while the hypothetical ROEs look great, I did point out that we don’t know the real IRR because we don’t know the lease terms (nor, indeed, the rates the ships will earn when the leases end). Also, these assets have *relatively* short-lives, and an x% ROE on a short lived asset is much less valuable than the same ROE on a long-lived one. Treat my maths as a paper exercise only.

I think the bolded part is key. Wouldn't returns be significantly lower once you account for required debt payments? The company has been trying to reduce the scheduled principal payments (which is fine by me and makes sense...to an extent), but these ships ultimately have a ~25y useful life.

So if you assume the required debt payments on these vessels are amortized over say 15y, IRRs on these recent deals look weak.

When Sokol joined Seaspan as Chairman, he berated the previous management team for levering up to build new ships, and then when the downturn hit, their balance sheet didn't allow them to buy (almost) new ships at less than 50% of cost (ie, the Sam Zell strategy - your competitive advantage is your opportunistic buying which gives you an asset cost base that is >50% lower than everyone else).

Newbuild ship costs haven't dropped by that much, and with charter rates not looking that different from ~2015 (I think) it seems like they're just doing what the previous management did. How is this point of view incorrect?
Title: Re: ATCO - Atlas Corp
Post by: Nelg on December 16, 2020, 01:53:26 PM
Sokol grew Mid-American at a 23% ROE for about 20 years.  His strength is capital-intensive businesses and making them very efficient.  Bing is no slouch either!  Cheers!

Yes. I’ve never really trusted that number because my source is Prem and I think he can be a bit sloppy with figures. But Sokol is definitely one of my big reasons for owning Atlas.

Actually, all you have to do is look at what Mid-American was earning when Berkshire acquired it in 1999 ($104M) and what it was making in 2010, shortly before Sokol left...$1,131M.  That's about 26% annualized over 10 years in earnings growth.  He essentially did the same thing 10 years earlier growing earnings from $10M to $104M.  Cheers!

Well, no. You also have to look at whether Berkshire contributed capital during that time. I’m sure you and others know the answer, but I don’t, which is why I take the CAGR as unproven!

Yes, BRK invested about $5b of additional equity capital after the acquisition (and another $1b of equity capital after Sokol left to fund the NV Energy acquisition).

If anyone's wondering, this is the history on CalEnergy/MidAmerican (I have gone through all their 10-Ks, though not in great detail - so I think the below is mostly correct:
- Sokol took over in Feb 1991.
- FY 1991 results:
NI $26.6m (vs 1990 NI $12m)
FFO $47.6m (don't have the 1990 number)
FD shares 36.5m (don't have 1990 FD shares outstanding)
= EPS $0.73/share & FFO $1.31/share

I don't have 1991 balance sheet numbers, but the below are 1992 numbers:
Recourse Net Debt/ FFO: -0.3x (ie, net positive unrestricted cash)
Total Net Debt/ FFO: 2.8x

- BRK acquisition of MidAmerican closed sometime in 2000.
- FY 2000 results:
NI $133m
FFO $597m
FD shares 43.8m
= EPS $3/share & FFO $14/share

Recourse Net Debt/ FFO: 3.6x
Total Net Debt/ FFO: 9.8x

Leverage was clearly higher, but when BRK acquired MidAmerican, they owned 2 regulated utilities in the UK and US and had a larger independent power plant portfolio...ie, the business quality was superior vs the small geothermal portfolio they owned when Sokol took over.

- IMO the "Sokol era" ended around 2009. He sold most of his MidAmerican shares (ie, to BRK) in 2009 for a cool $123m, and started the NetJets restructuring around this time.
- FY 2009 results:
NI $1.16b
FFO 3.3b
FD shares 75m
= EPS $15/share & FFO $44/share

Recourse Net Debt/ FFO: 1.6x
Total Net Debt/ FFO: 5.2x

There were huge one-time gains from their "failed" acquisition attempt of Constellation Energy Group in 2008 - they made a ton of money from termination fees and their financial restructuring there. And of course, Sokol was credited for the BYD investment which was made in 2008 and I believe is still held within the MidAmerican/BH Energy entity.
Title: Re: ATCO - Atlas Corp
Post by: petec on December 16, 2020, 02:00:56 PM
Agreed. And it won’t just be the Washingtons. There’s another big shareholder that needs cash flow, as discussed extensively on this board.

But also: while the hypothetical ROEs look great, I did point out that we don’t know the real IRR because we don’t know the lease terms (nor, indeed, the rates the ships will earn when the leases end). Also, these assets have *relatively* short-lives, and an x% ROE on a short lived asset is much less valuable than the same ROE on a long-lived one. Treat my maths as a paper exercise only.

I think the bolded part is key. Wouldn't returns be significantly lower once you account for required debt payments? The company has been trying to reduce the scheduled principal payments (which is fine by me and makes sense...to an extent), but these ships ultimately have a ~25y useful life.

So if you assume the required debt payments on these vessels are amortized over say 15y, IRRs on these recent deals look weak.

When Sokol joined Seaspan as Chairman, he berated the previous management team for levering up to build new ships, and then when the downturn hit, their balance sheet didn't allow them to buy (almost) new ships at less than 50% of cost (ie, the Sam Zell strategy - your competitive advantage is your opportunistic buying which gives you an asset cost base that is >50% lower than everyone else).

Newbuild ship costs haven't dropped by that much, and with charter rates not looking that different from ~2015 (I think) it seems like they're just doing what the previous management did. How is this point of view incorrect?

Depends on the timing of debt repayments but assuming they’re back end loaded IRRs could be quite high.

What’s your source on new build costs? Not that it matters much since the vast majority of capital deployed has been in acquisitions.

Title: Re: ATCO - Atlas Corp
Post by: Nelg on December 16, 2020, 04:43:53 PM
Agreed. And it won’t just be the Washingtons. There’s another big shareholder that needs cash flow, as discussed extensively on this board.

But also: while the hypothetical ROEs look great, I did point out that we don’t know the real IRR because we don’t know the lease terms (nor, indeed, the rates the ships will earn when the leases end). Also, these assets have *relatively* short-lives, and an x% ROE on a short lived asset is much less valuable than the same ROE on a long-lived one. Treat my maths as a paper exercise only.

I think the bolded part is key. Wouldn't returns be significantly lower once you account for required debt payments? The company has been trying to reduce the scheduled principal payments (which is fine by me and makes sense...to an extent), but these ships ultimately have a ~25y useful life.

So if you assume the required debt payments on these vessels are amortized over say 15y, IRRs on these recent deals look weak.

When Sokol joined Seaspan as Chairman, he berated the previous management team for levering up to build new ships, and then when the downturn hit, their balance sheet didn't allow them to buy (almost) new ships at less than 50% of cost (ie, the Sam Zell strategy - your competitive advantage is your opportunistic buying which gives you an asset cost base that is >50% lower than everyone else).

Newbuild ship costs haven't dropped by that much, and with charter rates not looking that different from ~2015 (I think) it seems like they're just doing what the previous management did. How is this point of view incorrect?

Depends on the timing of debt repayments but assuming they’re back end loaded IRRs could be quite high.

What’s your source on new build costs? Not that it matters much since the vast majority of capital deployed has been in acquisitions.

I agree the economics look good if debt repayments are back-end loaded but then the risk just gets transferred to lenders, and I believe most of the debt is recourse. I understand the "but this time the industry is an oligopoly" argument though, which might/should result in vessels not being scrapped before their useful lives (ie, like what happened during the last downturn).

Maybe I'm just a grumpy old credit guy, but creditors should want their principal back well before the useful life for the above reason, plus most customer credit ratings aren't that strong either. IMO the prices Atlas is paying for these vessels does not provide much margin of safety if there's a repeat of a ~2016-type downturn.

Newbuild cost is from a Jefferies report which sources from Clarksons, which is the same industry publication usually quoted in Seaspan's presentations. I don't know how to post pictures on here, but here's the data (I'm eyeballing it from graphs - I don't have the exact numbers):
- 8.5-9.1k TEU 5-year ranges:
NB costs: ~$82-90m, vs currently ~$87m
5y old vessels: $25-$70m, vs currently ~$50m.

- 13-14k TEU 5-year ranges:
NB costs: ~$105-115m, vs currently ~$105m.
5y old vessels (data only for 13k TEU): ~$85-$110m, vs currently ~$90m.

They seem to be buying stuff mostly in the ~11-12k TEU range (the last 2 acquired 12k TEU vessels were 2y old and $88m each), and I'm guessing the 5 12.2k TEU newbuilds they just ordered cost ~$500m, so [assuming similar charter rates] it seems like the economics between their acquisitions and newbuilds is similar.

Btw I own Atlas shares.
Title: Re: ATCO - Atlas Corp
Post by: ourkid8 on December 16, 2020, 04:47:43 PM
Are charter rates really not looking that different than 2015? I do not think rates have been this high since ~2008! Please see the below link.  When purchasing 5 new builds that are already backed by 18 charters at the current elevated rates...Maybe they are not following the same path as the previous management. 

https://harpex.harperpetersen.com/harpexRH.csv

Newbuild ship costs haven't dropped by that much, and with charter rates not looking that different from ~2015 (I think) it seems like they're just doing what the previous management did. How is this point of view incorrect?
Title: Re: ATCO - Atlas Corp
Post by: Nelg on December 16, 2020, 07:16:00 PM
Yeah sorry, I meant the contracted rates of the stuff they've been buying (not spot rates which as you noted are extremely strong right now). They said the ships they're building/recently acquired are generating EBITDA of ~$10m/year, so assuming ~65% EBITDA margins, the revenues seem to be similar to the 15 vessels delivered to Yang Ming in 2015-16 (which are generating revenues of ~$16.5m/year).

But anyway you're right, the 18y newbuild contracts at those rates are far better vs say the YM ships which were only on 10y contracts.

Edit: Should note the YM vessels were 14k TEU, so the recently-announced newbuilds likely have slightly lower newbuild costs than the YM ones. So yeah the economics may very well be good on those, assuming no MSC (or whoever the liner was) credit issues.
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 17, 2020, 06:25:06 AM
An update on how these notes priced, conversion prices, etc  -

https://www.sec.gov/Archives/edgar/data/1794846/000119312520319538/d63418dex991.htm
Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on December 17, 2020, 06:42:11 AM
An update on how these notes priced, conversion prices, etc  -

https://www.sec.gov/Archives/edgar/data/1794846/000119312520319538/d63418dex991.htm

I must confess I'm not sure I understand the net effect of the capped call transactions, i.e. why they are choosing this structure. Anyone have any insight on that?
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 17, 2020, 06:55:09 AM
Not sure if this helps but this is how I understood it -

Title: Re: ATCO - Atlas Corp
Post by: NBL0303 on December 17, 2020, 07:55:41 AM
Thank you gfp - I guess my question is more like, why did Atlas choose this structure for this offering? What's in it for them now versus other types offerings?
Title: Re: ATCO - Atlas Corp
Post by: petec on December 18, 2020, 12:01:16 AM
Sokol grew Mid-American at a 23% ROE for about 20 years.  His strength is capital-intensive businesses and making them very efficient.  Bing is no slouch either!  Cheers!

Yes. I’ve never really trusted that number because my source is Prem and I think he can be a bit sloppy with figures. But Sokol is definitely one of my big reasons for owning Atlas.

Actually, all you have to do is look at what Mid-American was earning when Berkshire acquired it in 1999 ($104M) and what it was making in 2010, shortly before Sokol left...$1,131M.  That's about 26% annualized over 10 years in earnings growth.  He essentially did the same thing 10 years earlier growing earnings from $10M to $104M.  Cheers!

Well, no. You also have to look at whether Berkshire contributed capital during that time. I’m sure you and others know the answer, but I don’t, which is why I take the CAGR as unproven!

Yes, BRK invested about $5b of additional equity capital after the acquisition (and another $1b of equity capital after Sokol left to fund the NV Energy acquisition).

If anyone's wondering, this is the history on CalEnergy/MidAmerican (I have gone through all their 10-Ks, though not in great detail - so I think the below is mostly correct:
- Sokol took over in Feb 1991.
- FY 1991 results:
NI $26.6m (vs 1990 NI $12m)
FFO $47.6m (don't have the 1990 number)
FD shares 36.5m (don't have 1990 FD shares outstanding)
= EPS $0.73/share & FFO $1.31/share

I don't have 1991 balance sheet numbers, but the below are 1992 numbers:
Recourse Net Debt/ FFO: -0.3x (ie, net positive unrestricted cash)
Total Net Debt/ FFO: 2.8x

- BRK acquisition of MidAmerican closed sometime in 2000.
- FY 2000 results:
NI $133m
FFO $597m
FD shares 43.8m
= EPS $3/share & FFO $14/share

Recourse Net Debt/ FFO: 3.6x
Total Net Debt/ FFO: 9.8x

Leverage was clearly higher, but when BRK acquired MidAmerican, they owned 2 regulated utilities in the UK and US and had a larger independent power plant portfolio...ie, the business quality was superior vs the small geothermal portfolio they owned when Sokol took over.

- IMO the "Sokol era" ended around 2009. He sold most of his MidAmerican shares (ie, to BRK) in 2009 for a cool $123m, and started the NetJets restructuring around this time.
- FY 2009 results:
NI $1.16b
FFO 3.3b
FD shares 75m
= EPS $15/share & FFO $44/share

Recourse Net Debt/ FFO: 1.6x
Total Net Debt/ FFO: 5.2x

There were huge one-time gains from their "failed" acquisition attempt of Constellation Energy Group in 2008 - they made a ton of money from termination fees and their financial restructuring there. And of course, Sokol was credited for the BYD investment which was made in 2008 and I believe is still held within the MidAmerican/BH Energy entity.

Thanks, this is useful. So 15/0.73=20x eps in 18 years for a CAGR of 18%, partly driven by an increase in leverage? That seem fair?
Title: Re: ATCO - Atlas Corp
Post by: petec on December 18, 2020, 12:30:46 AM
Agreed. And it won’t just be the Washingtons. There’s another big shareholder that needs cash flow, as discussed extensively on this board.

But also: while the hypothetical ROEs look great, I did point out that we don’t know the real IRR because we don’t know the lease terms (nor, indeed, the rates the ships will earn when the leases end). Also, these assets have *relatively* short-lives, and an x% ROE on a short lived asset is much less valuable than the same ROE on a long-lived one. Treat my maths as a paper exercise only.

I think the bolded part is key. Wouldn't returns be significantly lower once you account for required debt payments? The company has been trying to reduce the scheduled principal payments (which is fine by me and makes sense...to an extent), but these ships ultimately have a ~25y useful life.

So if you assume the required debt payments on these vessels are amortized over say 15y, IRRs on these recent deals look weak.

When Sokol joined Seaspan as Chairman, he berated the previous management team for levering up to build new ships, and then when the downturn hit, their balance sheet didn't allow them to buy (almost) new ships at less than 50% of cost (ie, the Sam Zell strategy - your competitive advantage is your opportunistic buying which gives you an asset cost base that is >50% lower than everyone else).

Newbuild ship costs haven't dropped by that much, and with charter rates not looking that different from ~2015 (I think) it seems like they're just doing what the previous management did. How is this point of view incorrect?

Depends on the timing of debt repayments but assuming they’re back end loaded IRRs could be quite high.

What’s your source on new build costs? Not that it matters much since the vast majority of capital deployed has been in acquisitions.

I agree the economics look good if debt repayments are back-end loaded but then the risk just gets transferred to lenders, and I believe most of the debt is recourse. I understand the "but this time the industry is an oligopoly" argument though, which might/should result in vessels not being scrapped before their useful lives (ie, like what happened during the last downturn).

Maybe I'm just a grumpy old credit guy, but creditors should want their principal back well before the useful life for the above reason, plus most customer credit ratings aren't that strong either. IMO the prices Atlas is paying for these vessels does not provide much margin of safety if there's a repeat of a ~2016-type downturn.

Newbuild cost is from a Jefferies report which sources from Clarksons, which is the same industry publication usually quoted in Seaspan's presentations. I don't know how to post pictures on here, but here's the data (I'm eyeballing it from graphs - I don't have the exact numbers):
- 8.5-9.1k TEU 5-year ranges:
NB costs: ~$82-90m, vs currently ~$87m
5y old vessels: $25-$70m, vs currently ~$50m.

- 13-14k TEU 5-year ranges:
NB costs: ~$105-115m, vs currently ~$105m.
5y old vessels (data only for 13k TEU): ~$85-$110m, vs currently ~$90m.

They seem to be buying stuff mostly in the ~11-12k TEU range (the last 2 acquired 12k TEU vessels were 2y old and $88m each), and I'm guessing the 5 12.2k TEU newbuilds they just ordered cost ~$500m, so [assuming similar charter rates] it seems like the economics between their acquisitions and newbuilds is similar.

Btw I own Atlas shares.

I actually think the opposite argument might apply regarding cash flow timing and IRRs. Seaspan have been moving away from asset-level debt, most notably with their big secured lending facility. I don't think there are any principal repayments associated with that facility - from memory it has a bullet maturity, and is effectively a huge revolver. When investments are funded out of this facility (or indeed any other corporate-level bullet debt), 100% of early-year cash flows accrue to equity and the debt can be paid off with later cash flows. Obviously this comes with a risk, which is that they might have trouble extending the revolver, but if you are prepared to take that risk the IRRs could be very attractive.

BTW I disagree that the cost difference of $88m vs $100m suggests similar economics. Assuming similar cash flows and therefore similar debt, a 12% difference in total cost represents anything up to about a 50% difference in equity requirement. It's potentially transformative, and my guess is that the IRRs on the acquisitions are significantly higher than the IRRs on the newbuilds. For the newbuilds, Seaspan is effectively just a capital provider clipping a spread until the lessor buys the ships in 18 years. This reduces the risk (not to zero, but it reduces it) so it is reasonable to assume the IRRs are lower or the leverage to achieve the same IRR is higher.

Re scrapping of vessels, I had a very interesting chat with a shipper recently who pointed out that the widening of the Panama canal had a significant one-off effect on obsolescence. Essentially a lot of ships built for the old canal (Panamax) became obsolete overnight as larger, more efficient ships came into play. Today, the limits on ship size are imposed by port capacity and journey length (you can't use huge ships on short journeys because the dwell time in ports is too long). To achieve another step-change would require hundreds of little projects - dredging ports, extending docks, etc., across dozens of jurisdictions - and these will not happen in a coordinated fashion. This means the last 15 years have seen a one-off supply shock in the shipping industry. That is part of what caused owners to scrap vessels before their useful lives ended.

Add the fact that the industry has been working off the 2008 newbuild excess for over a decade, and there is very little spare capacity and virtually no order book, and I don't worry about early scrapping. The only thing that concerns me on the supply side is the belt-and-road initiatives which are increasing the capacity to move containers across Asia by rail.
Title: Re: ATCO - Atlas Corp
Post by: petec on December 18, 2020, 12:55:37 AM
An update on how these notes priced, conversion prices, etc  -

https://www.sec.gov/Archives/edgar/data/1794846/000119312520319538/d63418dex991.htm

I must confess I'm not sure I understand the net effect of the capped call transactions, i.e. why they are choosing this structure. Anyone have any insight on that?

It makes my brain hurt frankly. gfp's post is useful but I don't fully understand the benefit of synthetically increasing the conversion price, rather than just increasing it. I assume it is to do with tax or accounting.

Anyway the net effect seems to be that they have raised 5-year debt at a total cost of 5.5% which could convert into shares at $17.85.

The bit that really confuses me is that Seaspan has the right to redeem the notes at par if the shares are over 130% of the unadjusted conversion price, which is $13. Doesn't that hugely reduce the value of the convertibility feature to the buyer?
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 18, 2020, 07:36:27 AM
I'm not an expert on these financings but what I understand is that the lenders (bond buyers) get a convertible with a 13 conversion price and ATCO spends some money (accounted for like original issue discount I believe) to synthetically bump that number into the 17's as far as the cash-for-dilution goes.  There was probably not an attractive market for converts that had a strike in the 17's.  Why they chose this structure - who knows - it was likely the most compelling option the bankers presented to them.  It doesn't sound uncommon but I'm sure it will create a little accounting noise around share price movement since Atlas holds the call spread if I am understanding it correctly.

For me, what was/is important was that the derivative trades and the convertible issuance caused the market price of ATCO to decline for no reason other than hedging to facilitate those derivative trades.  And that was/is an opportunity if you want more Atlas around 10.
Title: Re: ATCO - Atlas Corp
Post by: Nelg on December 18, 2020, 08:18:30 AM
Thanks for your thoughts petec, especially re the Panama canal. I have heard Atlas allude to this in calls but not explain it in that detail (or I didn't pick up on it). Are there any other sources/data you can share for this - particularly on your comment "the limits on ship size are imposed by port capacity and journey length (you can't use huge ships on short journeys because the dwell time in ports is too long)"

Their corporate debt is basically split ~20% revolver, ~60% TL, and the rest FFH notes, and scheduled repayments are a few hundred m/year. But I take your points and think you're putting out better ones than me.

On your MidAmerican question: "15/0.73=20x eps in 18 years for a CAGR of 18%, partly driven by an increase in leverage? That seem fair?"

It's fair to say that though he was likely also responsible for the ~2x increase in earnings from 1990 to 1991 too (he cut 25% of employees in the first few months of 1991, and started a few-year trend of increased load factors on the geothermal plants)...but I don't know if they raised equity in 1991. Anyway, it's a good record however which way you cut it, and it is more anomalous that he did that while also substantially improving the business quality.
Title: Re: ATCO - Atlas Corp
Post by: gfp on December 22, 2020, 06:24:18 AM
As some more color on the "why this structure" question - here are some quotes from Sokol and Chen (and the PR for the upsized, closed offering)

Quote
"This initial offering by Atlas's subsidiary, Seaspan, within the institutional unsecured credit markets resulted in providing low-cost unsecured capital for future growth and enhanced our balance sheet and capital structure while also providing increased financial strength. The transaction was an important step toward our objective of achieving a corporate investment grade credit rating. The capped call structure also provides protections to holders of our common shares by mitigating future dilution while setting a higher than market exchange price," commented, David Sokol, Chairman of the Board of Directors of Atlas.

"We are pleased to access the unsecured institutional credit markets with a structure that provides protections for current equity holders and an effective capital solution for our stakeholders. This offering further demonstrates our prudent decision-making regarding our capital structure, which is based on stringent financial discipline that ensures we are well-positioned to seize opportunities while reducing the Company's overall cost of capital. We believe that the exchangeable notes will offer our institutional investors a great opportunity to participate in our continuing quality growth, while optimizing our capital structure and operating platform for existing investors over the long-term," remarked Bing Chen, President and CEO of Atlas.

The notes will be exchangeable under certain circumstances at the option of the holders into Atlas common shares, par value $0.01 per share ("Atlas shares"), cash, or a combination of Atlas shares and cash, at Seaspan's election, unless the notes have been previously repurchased or redeemed by Seaspan. The notes are not guaranteed by Atlas or any of its or Seaspan's respective subsidiaries. The notes will mature on December 15, 2025, unless earlier exchanged, repurchased, or redeemed. The exchange rate will initially equal 76.8935 Atlas shares per $1,000 principal amount of notes (equivalent to an initial exchange price of approximately $13.01 per Atlas share). The exchange rate will be subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. After giving effect to the cap price established in the capped call transactions, the initial effective exchange price on the notes of $17.85 per Atlas share represents a premium of approximately 75% over the last reported sale price of the Atlas shares of $10.20 per share on the New York Stock Exchange on December 16, 2020.

http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20201222:nPn1SK3nKa&default-theme=true
Title: Re: ATCO - Atlas Corp
Post by: gary17 on January 12, 2021, 09:39:18 PM
this stock is clearly benefiting from the huge increase in freight price....is that understanding correct?
i wonder how sustainable this is and what this means....
Title: Re: ATCO - Atlas Corp
Post by: ValuePadawan on January 12, 2021, 10:29:40 PM
New CFO as well https://ir.atlascorporation.com/2021-01-11-Atlas-Announces-Appointment-of-New-Chief-Financial-Officer?asPDF=1
Title: Re: ATCO - Atlas Corp
Post by: bluedevil on January 13, 2021, 01:05:12 PM
Atlas will see some benefit from the increased rates, as they have a small set of ships that are on shorter term charters (mostly older/smaller boats).  Most contracts are on long term charters, so it won't necessarily benefit Atlas that much, and even when ships come off charter, they often give the liners options to extend for a year or two.

Atlas has a large number of ships on big contracts that are coming off charter in 2022 and 2023, but again often with liner options.  The big question in my mind is whether Atlas can use the booming prices that are currently prevailing to try to negotiate some favorable extensions of those contracts while the market is hot.  They don't need to fully capture the prevailing rates, but just use the hot market to secure second charters at good, profitable rates.  If they can do that, the biggest risk facing the company will have been removed and I believe will lead to a re-rating of the stock higher.  Fingers crossed!
Title: Re: ATCO - Atlas Corp
Post by: petec on January 14, 2021, 01:51:42 AM
Interesting to see the contex index (which tracks spot rates for smaller vessels) is at its highest level since before the GFC, and roughly double the average level since then.

Atlas doesn't have a huge amount of exposure to spot rates but this will help at the margin. It's also suggestive of tight supply and demand conditions, which can't quickly be fixed by increasing supply given the size of the current order book. 2021 will be an interesting year.
Title: Re: ATCO - Atlas Corp
Post by: petec on January 14, 2021, 02:05:48 AM
Thanks for your thoughts petec, especially re the Panama canal. I have heard Atlas allude to this in calls but not explain it in that detail (or I didn't pick up on it). Are there any other sources/data you can share for this - particularly on your comment "the limits on ship size are imposed by port capacity and journey length (you can't use huge ships on short journeys because the dwell time in ports is too long)"

Sorry only just seen this. No, I can't give a specific source, but I think Seaspan have mentioned it on conference calls and I have heard it from other sources also. It makes intuitive sense. The longer you're at sea the more you save by cramming more containers onto one ship. But if you're not at sea long, then the time taken to load and offload them offsets the benefits. I believe even the trans-Pacific route is too short for the the really big ships, which are only optimal on Asia-Europe routes. I may have misremembered that specific datapoint but the overall point stands.